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Confusing Aldi with Coles

Inside Retail reported that Dick Smith Foods will be closed due to increased competition from German-based discount supermarket Aldi. Dick Smith said that problems have arisen because Aldi’s “method of business is ‘not sharing the wealth’ - they do this by having less and less staff, and Coles and Woolworths will have to match that; They’ll have to put off a tremendous amount of staff so they can get their overheads down to compete with Aldi.” Dick Smith has missed the key point: the problem is not with Aldi but with Coles and Woolworths. Aldi didn’t cut any staff – they just don’t need so many people because their business model is based on Operational Excellence.

Cotton On's e-commerce journey

During the 2018 Online Retailer conference in Sydney, Cotton On Group's GM of E-commerce (Brendan Sweeney) shared key data about the recently launched and highly successful Perks loyalty program, now rolled out worldwide. By linking the underlying technology from Retail Directions with their website, Cotton On was able to set up the program "within a couple of months". Over 3 million customers have joined the scheme in 2018. The Perks program is another powerful tool in Cotton On's multi-channel journey, following the previously deployed 'Store to Door' service, also supported by the Retail Directions platform. Brendan pointed out that 50% of in-store customers who use the service convert into multi-channel customers.  

Grocery wars in the UK

The Daily Mail reported that Tesco has decided to launch a chain of discount shops to take on cut-price retailers Aldi and Lidl at their own game. Apparently, 60 locations have been earmarked to be rebranded. On the surface, the move is understandable, as Aldi and Lidl have doubled their share of the UK grocery market to almost 13% in five years. However, in our experience, running an operationally excellent, discount retail chain requires a totally different culture. We can't see how a business, which doesn't have such a culture at present, could suddenly acquire it overnight.

The mystery of AI resolved

We have been attending Online Retailer conference in Sydney and one of the recurring topics is AI and its likely impact on retail and the society in general. We have sensed considerable confusion regarding the meaning of the term and the perceived capabilities of this fascinating technology. Retail Directions' delivered a keynote address to clarify the essence of AI, what are the pre-requisites to deploy it in a retail enterprise, and what it can do for retailers. Monitor Insights section for a full briefing - coming soon!

Levelling the tax playing field

The NRF reported that the US Congress' House Judiciary Committee has been conducting hearings on the impact of the Supreme Court’s South Dakota v. Wayfair decision on businesses and consumers.  The ruling requires goods sold over the Internet to be properly taxed if shipped from another US state. The NRF representative commented on smaller retailers often been the victim of “showrooming,” where consumers come into the store to take advantage of sales associates’ expertise and see merchandise in person, then order from an out-of-state online competitor to avoid paying 7-8 percent state and local sales tax. It is fortunate that the Australian Federal Government, after years of hiatus, finally resolved this issue for Australian retailers.

The taxman always needs more

Reuters reported that European finance leaders called for global rules to tax the digital economy at a meeting of G20 finance ministers and central bankers in Argentina on Sunday. Some 200 companies would fall within the scope of the new turnover tax, with an estimated additional annual revenue of about 5 billion euros ($6 billion). US G20 delegates objected: “One of the big challenges is that taxation of the digital economy is mostly, of course, a taxation of American companies - because they are the key players in the world - so the United States feel that this is an attack concerning their digital economy.”
Tuesday reports strong trading results for FY18

Inside Retail reported on a cash flow statement and trading update released by today. The online retailer revealed a $23.7 million full-year EBITDA in FY18, a 90% increase from FY17.'s revenue in FY18 was up more than 40% on FY17, indicating that the business brought in more than $400 million. These are solid results in the age of Amazon operating in Australia. If any business has cause to be concerned by Amazon's arrival Down Under, it was Kogan.

How to beat Amazon

The Hustle reported on how electronics retailer Best Buy has been able to thrive despite Amazon's dominance in the market. The retailer's secret weapon? Real, live Geeks. Best Buy acquired a 50-person startup called Geek Squad in 2002, today the Squad is a 20,000-person IT army. By leading with human-led customer service, Best Buy has exceeded earning predictions for 22 consecutive quarters and quadrupled its stock price. In a world increasingly depersonalised by technology, customers covet customer service as a social and informative experience.  

CDs relegated to bargain bins as digital music booms

The AFR reported that Sony has shut its CD, DVD and Blu-ray disc factory in western Sydney after 25 years. In another article, the StarTribune informs that leading electronics retailer, Best Buy has relegated CDs to bargain bins as sales dwindle. Such is the fate of physical media in the age of booming digital content streaming. Very soon, retailers who have made a living selling CDs, and related products, will have nothing to sell. When was the last time you purchased a Compact Disk?

Sobering fraud statistics

AFR published interesting statistics from PwC.  For the first time in the history of this survey (27 years) crime threats to companies from outside exceed the risks from inside.  The shift is mainly due to the increase in cybercrime.  Hackers, customers and organised crime now account for 64% of fraud activity.  Sobering news for retailers.  We have previously stressed the need for retailers to button up and get ready for the upsurge in cybercrime.

Chilling statistics about self-checkout

NRF's STORES published an article about theft at self-checkouts.   A recent survey of 2,600 people found that nearly 20% admitted to stealing from self-checkout in the past; half said they did so because they didn’t think they would get caught.  A 2016 study by the University of Leicester in the UK found that retailers which use self-checkouts had a loss rate double the industry average. In an audit of 1 million shopping trips, researchers discovered 850,000 of 6 million items purchased were not scanned.  Clearly, retailers should think twice before 'investing' in such technologies.

UK sales growth

Reuters continues to publish meaningless retail statistics, this time about UK retail sales in the second quarter of 2018.  Apparently it was 2.1% up on ... the previous quarter.  No retailer or industry analyst would ever look at such a  number.  The figure that matters was June year-on-year growth, which was 2.9% - pretty competent outcome.  In May YOY growth was 4.1%.