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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?

One third of households to adopt 5G for their internet

The AFR reported that new research found that one in three Australian households are interested in subscribing to 5G wireless services for their home internet connection. The finding further threatens the already troubled NBN - the fixed-line network has been plagued with endless rollout and performance issues. 5G is capable of speeds up to 20Gbps, which is much faster than the 100 Mbps most NBN customers are limited to. We called out this situation back in 2015 in an article about how misguided the NBN is as a national technology initiative.

Aldi calls out supermarket loyalty schemes

235 reported that Aldi has hit out at Woolworths and Coles in a new campaign, calling their loyalty programs ‘schemes’ that benefit shareholders, not shoppers. Aldi's view is that supermarket loyalty programs “manipulate” shoppers potentially costing Australians up to $1500 each a year as they desperately try to accrue enough points for a toaster while forgoing actual savings at the checkout. But Woolworths and Coles have said Aldi’s calculations aren’t a true reflection of how customers accrue points and rewards can be earned far quicker. However, a lecturer in Psychology at the University of Tasmania said loyalty programs can make people “less rational” with their shopping. You don't have to be a professor to know that both Woolworths' loyalty scheme and Coles' wingless Flybuys are pretty much gimmicks. BTW: Aldi doesn’t have any loyalty programs and each location it opens takes customers away from Coles.

Advertisers ditch Google for Amazon

CNBC reported that advertisers are increasingly ditching Google and putting their search budgets into Amazon ads instead. It’s not just a handful of companies, according to execs at multiple agencies, the moves, so far, have amounted to hundreds of millions of dollars. Amazon is making huge headway in the advertising game, becoming the 3rd largest US digital advertising platform behind Google and Facebook. It also doesn’t hurt that around 49% of product searches begin on Amazon, meaning that Google is becoming an unnecessary middleman.

Walmart patents biometric shopping handles

CB Insights reported that Walmart aims to use biometric shopping handles to track customers' heart rates, temperatures, and stress levels. The company’s recently published a patent application titled “System And Method For A Biometric Feedback Cart Handle”, which aims to equip shopping cart handles with the ability to gather biometric data to determine when customers might need help. The system would continuously monitor these metrics throughout the customer’s time in the store, measuring them against the baseline. The retail giant says the data would be used to help identify shoppers in distress and to improve their overall shopping experience, without collecting personal data.

Amazon shelves sexist AI recruitment tool

The UK Daily Telegraph reported that Amazon has ditched a "sexist" internal tool that used artificial intelligence to sort through job applications. Created in 2014, the program was used to sort through submitted resumes and pick out the most promising candidates. However, it taught itself to prefer male candidates over female ones, repeatedly penalising resumes that included the word "women's". The problem stemmed from the fact that the system was trained by people over a 10-year period, most of which came from men. In fact, the danger of inherent bias in the use of algorithms is a common problem in the technology industry. This stems from the fact that artificial intelligence doesn't exist, what we deal with is actually artificial instinct - machines equipped with pattern-based learning, which gives the Appearance of Intelligence. You can read more about Artificial Instinct here.

Will Baby Bunting get the last laugh?

Multiple media outlets reported that Baby Bunting looks poised to shine in the children's retail space now that the clearance sales of its market-exiting competitors are over. In a Morgan’s Conference presentation to shareholders earlier today, Baby Bunting said that  FY19 EBITDA is expected to be in the range of $24 million to $27 million, representing growth of between 30% and 45% – the guidance assumes the opening of six new stores during FY19, as planned. Baby Bunting plans to build a network of more than 80 stores, with just 49 at present there is a long way to go, but its online strategy seems to be in line with its bricks and mortar growth to drive customer interaction.