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Spending in AU stalls as businesses turn cautious

Business Insider reported that spending levels across the Australian economy grew at the slowest pace in over a year in September, driven by a sharp reduction in expenditure among business. The Commonwealth Bank’s Business Sales Indicator (BSI) — a measure that uses the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities to track economy-wide spending — grew by just 0.2% in trend terms last month, the weakest increase seen since May 2017. But, it's not all bad news: in trend terms, the BSI found retail stores increased by 1% in September, the largest increase in six months.

RD POS fully integrated with Adyen

Retail Directions announced that its store-level systems - POS and mobile POS - are now fully integrated with Adyen, a leading global payments platform. Adyen provides payment technology to the likes of Uber, Netflix, eBay, Spotify, LinkedIn, etc. Retail Directions’ clients with an international footprint now have the option to deploy a single, globally-unified payments platform.

Roger David enters voluntary administration

Business Insider Australia reported that Roger David, Australia’s third largest Australian menswear retailer, has succumbed to the retail crunch and increasing competition online and has gone into voluntary administration. The 76-year-old company says it couldn’t compete with global retailers operating in Australia and with digital sites. Its 57 stores, with 300 staff, will continue to trade under administrators for the time being. Combined with tough market conditions, this situation is yet another example of how out of control utility prices have hit discretionary spending hard with serious consequences for specialty retailers.  

Afterpay faces a bumpy three months

The AFR reported that Afterpay is in for a volatile three months as buy now, pay later schemes - which consumer groups say exploits a loophole in lending laws - will be put under the microscope as part of a new Senate inquiry into parts of the finance sector. Payday lenders and debt management firms will also come under scrutiny. Afterpay, not unlike Uber and other technology businesses, has been savvy enough to stay one step ahead of legislators until now, but a correction was imminent from the start. Lending laws aside, let's not forget that buy now, pay later offerings have also been great for retailers, attracting consumers back into stores.  

New Look to exit China, close 120 stores

Reuters reported that British fashion group New Look will exit China and close its remaining 120 stores in the region by the end of the year. The decision to exit China is part of an ongoing review of New Look’s international strategy. The retailer has been battling In March, New Look staved off a potential administration when British creditors and landlords backed a restructuring plan enabling it to close 60 UK stores. New Look has an impressive story of previous success and their current woes confirm how difficult it is to run a successful fashion business, especially in the current climate.

The Reject Shop hit hard by low spending

The AFR reported that discount retailer The Reject Shop has blamed stagnant wage growth and rising household costs for an alarming drop in sales. The retailer's shares plunged as much as 40% yesterday to 12-month lows after it slashed its December-half net profit guidance from $17.7 million to between $10 million and $11 million. The Reject Shop's CEO blamed, "the extremely weak retail environment". This story confirms what we've noted in today's post about retail challenges in Australia - soaring utility prices have hit discretionary spending hard with serious consequences for specialty retailers.

Retail challenges in Australia

We just attended a briefing by the Chief Economist from NAB. His data confirmed our long-held view that online sales are sucking profits out from many retail verticals. Consequently, retailers who can engage digitally to bring customers to their brick and mortar outlets should give preference to this model, rather than try to increase online sales. The Digital Path to Purchase needs to become the new paradigm for specialty retailers, replacing the current siloed arrangements, which encourage online and store teams to compete, to the detriment of the enterprise as a whole.  NAB’s CE also pointed out that recent, massive increases in utility prices (energy, rates etc. going up by 20%) have dampened discretionary spending, seriously impacting specialty retailers.

Kaufland ramps up for Aussie rollout

The AFR reported that German discount retailer Kaufland is stepping up its plans for expansion into Australia with an additional $60 million capital to assist in the roll-out of its stores and new headquarters. The chain which operates more than 1,250 stores across Europe is expected to open its first two hypermarkets in Australia in fiscal 2019 with plans to open 32 stores in Australia by 2023. Kaufland has been described as the German version of Costco, without the membership costs, and analysts believe that due to the vast range of products it offers, the “big two” won’t be the only ones to feel the heat from this new competitor - Kmart and Big W will likely also be hit.

Amazon AU adds pantry food range to online offering

The AFR reported that Amazon has added food to its online offering in Australia, stepping up pressure on Coles and Woolworths to invest in their online grocery offers. Amazon AU will start selling groceries such as tea, coffee, and tinned goods as well as specialty, health and organic foods sourced from more than 400 Aussie and international brands. The e-commerce giant has also established a one-day delivery service in select locations, prompting Coles and Woolworths to start testing express two-hour deliveries. We've said it time and again, there is a real danger in trying to compete head-on with Amazon in the digital space. Woolworths and Coles should be investing in store experience and better value for customers rather than trying to continually keep pace with Amazon. Such a strategy would serve them well against Aldi too.

Tech stocks take a hit in ASX slump

The AFR reported that the share market has been undergoing a correction in relation to technology stocks. It mentioned Afterpay, which saw its share value decline around 30%. The adjustments in ASX follow a near-correction by the Nasdaq Composite Index last week, the home of the FAANG stocks Facebook, Amazon, Apple, Netflix and Google. From its record high two months ago to last week's lows, the tech-heavy index fell more than 9%.

Adyen teams up with Gap Inc.

WWD reported that Gap Inc. has teamed with unified payments provider Adyen, to install the company’s technology in more than 150 stores in Europe. Adyen commented that its payments platform will enable Gap and Banana Republic to provide a consistent experience across its markets. Retail Directions powers both the Gap and Banana Republic stores in Thailand; we work with Adyen on making its payments technology available to our clients worldwide.

Two stories about US retail sales figures

Mainstream media continues to demonstrate its lack of understanding about the retail industry. Reuters reported that “US retail sales increased modestly” because “retail sales edged up 0.1% last month”.  In reality, US retail sales are absolutely booming, at 4.7% up  compared to September last year.  This is against the background of low inflation and full employment, and despite interest rate hikes. We wonder whether the US economy is showing signs of overheating?