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29
Jun-18
Friday

Toys R Us soldiering on

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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

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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

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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.
27
Jun-18
Wednesday

Luxury brands target menswear growth

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Reuters reported that luxury brands are investing in menswear, which is expanding faster than women's clothing as styles loosen up and streetwear like hoodies find a new audience. Sidney Toledano, head of LVMH’s fashion group, said, "There’s strong demand across the men’s fashion industry, in all its shapes and forms, and which comes in part from a younger clientele. We see it very clearly in the sales." The report noted a fascinating statistic: currently, only 7% of luxury brand sales go to men.

Supreme Court sides with AMEX in antitrust case

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National Public Radio in the US reported that the US Supreme Court has sided with American Express on their policies that stop retailers from steering customers to other credit cards that charge lower swipe fees - a practice retailers say raises costs to consumers. We don’t quite agree with this – it is actually the retailers who end up paying for it.  BTW: There was no mention of a surcharge restriction for AMEX, which means that retailers can easily work around the ruling by imposing surcharges. Only then will customers be impacted (and AMEX).  However, surcharges will make the retailers look bad in the eyes of the customers.
26
Jun-18
Tuesday

What about profits?

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USA Today reported that Amazon Prime discounts will now be available in all Whole Foods outlets.  This follows initial pilot stores, which were well received by customers (why wouldn’t they?).  USA Today commented that “Discounts and loyalty programs have long been a common strategy among grocery stores, serving a dual purpose. Discounts lure shoppers in and return visits provide the store with data on their shopping habits.” Sounds very cliché to us.  Since Amazon took over Whole Foods, they have been progressively changing the business, eroding its gross and net margins.  But, running a business at a loss is nothing new for Amazon, to the detriment of the competitors.

Freud and IGA

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The Australian Financial Review must have made an error when it said that “Retail sales across the IGA retail network declined 0.9% on a like-for-like basis for the 12 months to April 2018” and then immediately followed that statement up with a quote from the new CEO of Metcash: “Now we need to figure out how to go faster.”  This sounds like a Freudian slip – Metcash is in trouble, mainly because of its business model rather than competition or so-called unfavourable market conditions.  The recent announcement of Drakes' switch to their own distribution network confirms this.  Any independent chain that reaches a size sufficient to support their own sourcing will walk away from Metcash.  Why wouldn’t they?
25
Jun-18
Monday

Shopping centres paradox

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Inside Retail published an article endorsing the shift towards services as the way for shopping centres to stay relevant, “a strategy that has proved highly successful and created a new class of ‘super’ neighbourhood shopping centre.”  The article is timely, as it coincides with our observations that many recently refurbished shopping centres have an issue with inadequate car parking space.  During weekends it is near impossible to find a parking spot and the shift towards services will make matters substantially worse, as services require longer customer visits.  It is a vicious circle: online takes traffic away from the shopping centres, which then refurbish to become more attractive and in the process overstretch their car parking capacity, pushing more people to buy online.

Godfreys going private

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Inside Retail reported that John Johnston has effectively secured the purchase of the business, with more than 91% of Godfreys’ shares now in his hands. He intends to delist the company, undertake an overhaul and rebuild it.  A big task, given the difficulties the company is in.  Delisting has some negative implications as well, particularly affecting relationships with banks and landlords.

US retailers applaud sales tax ruling

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The US Star Tribune reported that major US retailers, including Target and Best Buy, cheered the recent Supreme Court ruling that will allow states to require online retailers to collect sales taxes. Target stated that it “has long advocated for sales tax policies that level the playing field and treat all retailers the same, whether they have stores, operate online or both.” Best Buy officials said the decision "finally brings sales tax collection into the internet age, and reinforces the basic American notions of fairness and a level playing field for all who choose to compete in the marketplace."  We share the sentiment – there's nothing wrong with taxes, as long as they don’t distort the economy.  Amazon is caught in the new ruling and will need to apply sales taxes as required.  Makes us wonder whether they will display the same emotional reaction as we saw in relation to the Australian GST system clean up?