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4
Jul-18
Wednesday

Pharmacy and supermarkets: little guys feel the pinch

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The AFR reported that shares in Sigma Healthcare fell a further 3% yesterday following a 40% crash on Monday, after the announcement that Chemist Warehouse is switching its sourcing to EBOS. According to the AFR, Sigma will now work more closely with a group of single store pharmacy outlets known as Pharmacy Alliance, who is set to become Sigma's largest customer by mid-2019. The situation has many parallels to the independent supermarket space, with the independents (supplied by Metcash) under pressure from larger, more operationally efficient competition.
3
Jul-18
Tuesday

SAP lost in the Cloud?

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According to the AFR, the German software company SAP lost $140 million last year on turnover of about $1 billion in the APAC region.  The CEO made a comment that this was the result of switching to a cloud-based subscription model, which is exposed to intense competition.  He sees the shift as a positive, as the number of customers using SAP has been growing. We just can’t see how a loss-making venture can make it up in volume?

More upheaval in the wholesale space

18
The AFR reported that Sigma Healthcare’s shares dropped 40% yesterday after the announcement that Chemist Warehouse has decided to switch its sourcing to EBOS. This will cut 42% of Sigma’s revenue and it confirms the natural trend: when a chain of stores gets to a certain size, unless they are vertically integrated already, they will gain massive power over their wholesaler. And, they will use it.  We have seen a similar situation recently when Drakes decided to walk away from Metcash. A question needs to be asked though: while EBOS will gain the revenue, will they make any profit? Such ‘super’ deals usually come at a heavy price.

Carrefour and Tesco

19
An interesting ‘alliance’ has been announced between French Carrefour and UK Tesco – according to the AFR, the two giant companies will collaborate in the sourcing and buying area. We see this as somewhat unprecedented, but interesting, as the companies don’t have overlapping markets at present. Tesco and Carrefour are similar in size (around $80-$90 billion in turnover). Is this the prelude to a merger at some stage?
30
Jun-18
Saturday

Bitcoin out of luck (again)

42
Reuters reported that Bitcoin slid to its lowest level since the last year ($5,774).  It is now down 70% from its December 2017 peak.  Reuters attributed this to "waning investor interest and recent negative headlines from global regulators".  We think that a word such as 'speculators' or 'gamblers' would have been more appropriate than 'investors'.  We are not the only ones who have issued repetitive warnings about the dangers related to betting money on such schemes.
29
Jun-18
Friday

Pillow Talk success

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Inside Retail commented about Pillow Talk’s strong focus on omni-channel business model, aimed at delivering superior customer experiences and building brand loyalty. The business started 40 years ago and has grown substantially over the last few years, to nearly 60 large format stores across Australia. Pillow Talk is one of the largest home linens specialists in the country.  Retail Directions in proud of being associated with Pillow Talk’s success story – we have been providing core systems for the business for a number of years.  It is worth noting Retail Directions strong presence in this market segment, with other important brands such as Bed Bath N’ Table and Sheridan also using our platform.

Grocery news from the UK

40
Retail Gazette in the UK reported on the sales results in the UK grocery sector.  The typical growth year-on-year was around 2% for most grocers, with the exception of Lidl (5.5%) and Aldi (7.4%).  These discount operators continue to grow their market share (from 13.2% last year to 14.3% this year).  Their continuing success reinforces our view that in the grocery segment the long term winners will be chains that mastered operational excellence, not those with bloated head offices, costly IT systems, and buying departments trying to squeeze ever more out of the already struggling suppliers.

Toys R Us soldiering on

30
Toys R Us continues to operate in Canada, now under a new owner - Fairfax Financial Holdings, which bought the 80+ store retailer for $300 million in early June. According to Canadian Financial Post, the stores have annual turnover in excess of $1 billion.  The business still has to cope with the negative news about Toys R Us coming from the US, but its management is optimistic about the future.

Customer backlash

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The Herald Sun reported that Woolworths is experiencing strong customer backlash after it decided not to provide plastic bags. “Irate customers have complained about having to pay for bags at the checkout while some shoppers have not had enough of their own bags to fit all their own groceries.”  Chaos at the checkout was to be expected. Hopefully, Woolworths (and Coles) will learn that doing something to align with the sentiments of 70% of their customers, with the certainty that the remaining 30% will get angry is not good business.  As noted in a previous post, plastic bags are only a tiny part of the problem when contrasted against the total waste generated by supermarkets anyway.
28
Jun-18
Thursday

Cotton On joins forces with The Iconic

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Inside Retail reports that the Cotton On Group has started to offer products from several of its retail brands on The Iconic. This marks the first third-party wholesale partnership for Cotton On Group, which has a global presence of more than 1400 bricks-and-mortar stores and online sites in 18 countries. Shoppers can now purchase items from Cotton On, Cotton On Body, Rubi, and Typo on The Iconic. Retail Directions is proud to play a part in the Cotton On Group's ongoing success story.

Tax uncertainty hurting retailers

29
We tend to avoid political commentary, but in this instance, the government (understood widely – those in the Cabinet, in the Shadow Cabinet, as well as all the elected representatives) need to be called out as the company tax system lingers in a half-cooked state between 30% and 25%, under a threat to be reversed if the government changes at the next election. It is hard to comprehend how there can be any opposition to dismantling the antiquated two-tier company tax system, all this does is encourage companies to stay just below the threshold. It is equally difficult to operate a business under an uncertain tax regime.  Surely our politicians understand that nothing is worse for business, and therefore retailers, than chaotic rules?

Digital privacy in the headlines

23
The AFR reported on the impact of recent changes to the privacy laws in Europe, Australia, Asia, and the US, particularly the far-reaching tentacles of Europe’s new General Data Protection Regulation (GDPR) through the global supply chain. Many Australian companies, retailers included, are now becoming aware of direct GDPR obligations or are getting caught up in indirect onerous compliance because of their European-related activities. The impending cost of GDPR to businesses is staggering too, with Fortune Global 500 companies expected to spend about US$8 million on compliance. The upside of all this? Now may be a good time to become a privacy manager.