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Amazon to buy stake in India's Future Retail

The Economic Times reported that Amazon is set to acquire a minority stake in Indian retail giant Future Retail. Once the deal is done, the e-commerce platform will gain access to nearly a third of India's organised food and grocery market through the Big Bazaar and Nilgiris supermarket chains and other outlets. Amazon will buy 9.5% stake in Future Retail, a deal is estimated to be in excess of US$300 million.

Lowe's shuts 51 stores in US and Canada

Reuters reported that home improvement chain Lowe’s Companies Inc announced the closure of another 51 underperforming stores in the United States and Canada earlier this week as it strives to compete with rival Home Depot Inc in a slowing housing market. Lowe’s has been striving to find ways to catch up with the long-time sector leader Home Depot, whose stores on average generate almost twice as much in sales. Lowe's is the same retailer that Woolworths partnered with in the failed Masters joint venture, perhaps Woolies backed the wrong horse.

Industry group campaigns against Kaufland

Inside Retail reported that an industry group made up of FoodWorks, IGA, Friendly Grocer and more are stepping up a campaign in protest at the arrival of German hypermarket, Kaufland, to Australia. The CEO of Master Grocers Association, who is involved with the Save Our Shops campaign, said that the retailer poses a “major risk to any family enterprise and private business”.  Save Our Shops campaigners are frustrated because the Kaufland consortium went straight to the Minister for Planning instead of the usual process of going through councils. Kaufland is known as a “destination retailer” as its stores are planned for sites outside of the main town centres, which the industry group argues can put the high street and local shops at risk as they take away foot traffic. In our view, the campaign is misguided. Using non-commercial tools to obstruct a competitor tells you one thing: they should focus on fixing their own offerings ASAP.

September retail statistics

Business Insider reported that Australian retail sales rose marginally in September, rounding off what was a weak quarter for spending at the shops. According to the Australian Bureau of Statistics (ABS), sales rose by 0.2% to $26.893 billion after seasonal adjustments, undershooting expectations for a larger increase of 0.3%. Sales previously grew by 0.3% in August, the same level as the original estimate. Refreshingly, rather than just focusing on the month-to-month statistics, the article notes the year-on-year increase in spending as well. From a year earlier, spending increased by 3.7%, the same pace seen in the 12 months to August.      

November shopping now bigger than Christmas

The AFR reports that November has overtaken December as the biggest shopping month of the year. Retail spending in November overtook sales in December for the first time in 2016 and the trend gathered pace in 2017, with seasonally adjusted retail sales rising 1.3% to $26.39 billion – the strongest monthly growth for the year – while December sales fell 0.6% to $26.25 billion. We think that this is actually good news for retailers, as the trend spreads the peak traffic over two months, reducing the pressure. It also tells us that retailers need to start preparing for peak trading even earlier next year.

WWW inventor says tech giants need to be split up

Reuters reported that the inventor of the World Wide Web says tech giants such as Facebook and Google have grown so dominant they may need to be broken up. The digital revolution has spawned a handful of US-based technology companies that now have a combined financial and cultural power greater than most sovereign states. Apple, Microsoft, Amazon, Google, and Facebook have a combined market capitalisation of US$3.7 trillion, equal to Germany’s gross domestic product last year. Given the tech giant's growing customer data monopoly and market power, we've echoed this sentiment in the past, noting that changes in the legal and regulatory framework to put serious constraints on the large technology companies are inevitable.

Coles to squeeze more blood from suppliers

The AFR reported that Coles plans to keep the lid on food prices by taking a tough stance on supplier requests for price increases. Coles' MD said the retailer will only grant such requests when they are justified by rising costs. Coles' has obviously figured out that with the like of Aldi to compete with on price point, they can't ask their customers to subsidise its bloated cost base. So, instead of focusing on becoming more operationally efficient, it will squeeze more blood from suppliers. We're not the only ones who this for what it is, with growing calls for a royal commission into the major supermarket chains' treatment of suppliers.

Halloween retail is big business

According to the National Retail Federation, Americans will spend approximately US$9 billion on Halloween festivities this year (US$86.79 per US citizen). The NRF’s report shows the rise of social media has promoted massive Halloween spending among millennials (selfie culture), with exponential increases in money spent on adult and pet costumes.

Lovisa persists with global expansion despite soft start to 2019

The AFR reported that market darling Lovisa has lost some of its shine after revealing a "challenging" start to 2019, with same-store sales slipping 0.9% in the year to date. Off the back of the news, Lovisa shares, which were previously trading about 18 times forward earnings, plunged 22% but then made a small recovery by the close of trading. Despite the soft start to the year, the retailer's leadership team remains upbeat about the company's prospects and continue to work on a pilot program in North America.
Tuesday blames GST for share plunge

The AFR reported that online retailer has blamed changes to the GST and increased competition for crunched sales and gross margins - less than two months after co-founders Ruslan Kogan and David Shafer sold $40 million of shares. shares plunged by one-third after it revealed that sales from global brands had fallen 27% since the new GST regime came into effect on 1 July 2018. The retailer had cut prices in an attempt to match overseas websites avoiding the new GST rules. We must ask: how can this be an issue? Before no international online retailers were paying GST, now most do. Surely, things should be more equitable holistically now?

NBN ‘not fit for commercial purpose’

My Business reported that the NBN has been labeled “the silent train wreck” by a commercial property analyst, who claims that property values are increasingly tied to the quality of connection speeds than physical location. The analyst noted that rollout expansion of the NBN “has flatlined in 2018”. He also suggested that the government has prioritised cost-cutting over quality, to the detriment of business customers – particularly SMEs. The negligence of the NBN, AKA White Elephant Network, impacts retailers in many ways. And, fairly the analyst asks, “So where are the critics? The peak industry bodies that should speak out about our failure to compete globally on digital connectivity are silent. No organisation has suggested the unthinkable – the NBN is not fit for purpose.”  
Monday shares drop 30%

SBS reported that has had about $130 million wiped off its market value after the online retailer flagged declining first-quarter margins and an ACCC investigation into one of its promotions. Shares in were 30% lower at lunchtime today after the company said revenue from sales of global brands in the three months to September 30 was 27.4% lower on the prior corresponding period. The retailer blamed foreign-owned competitors who undercut Australian rivals by avoiding GST, and said margins had also been hit by the weaker Aussie dollar. The resulting sell off sent shares down to their lowest since July 2017 and wiped $35 million from the value of founder Ruslan Kogan's personal stake.