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20
Mar-19
Wednesday

Big W faces huge rise in wage bill

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Big W's wage bill is set to jump tens of millions of dollars, even as it struggles with losses, after it reached a new enterprise agreement for the first time in seven years. Most of the retailer's 17,000 workers voted in the agreement on Monday that will deliver wage rises, restore penalty rates and casual loadings and lift redundancy pay. The deal replaces Big W's long-expired 2012 agreement that has allowed the company to pay workers significantly below the amount they would have earned under the award. Conservative estimates by The Australian Financial Review last year had the retailer set for a $30 to $40 million jump in its labour costs once it restored award rates, excluding any annual pay rises.

How Costco thrives in the age of Amazon

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Inc. reported on how Costo thrives in a rapidly changing retail environment. While legacy stores like Sears and Toys "R" Us have gone bankrupt and are left for dead, and Walmart is desperately fighting to hold off Amazon and the e-commerce tsunami - Costco just reported over 7% growth and a surge in net income (27%, to US$889 million). Comparable store sales continue to grow, as does the company's e-commerce business. And worker satisfaction is off the charts. So, how does an old-school company like Costco flourish in the modern age? A key ingredient in the retailer's success is the pursuit of a people-first culture, consistently rewarding employees, both financially and emotionally but with a focus on fostering employee pride in the organisation and employment security. The second part of its 'secret sauce' is the ability to give customers what they want - no-frills merchandising combined with high-quality and great value products. When you take a look under the hood, it's easy to see why Costco is so successful at keeping customers happy. Great pay. People first. Customer satisfaction. Emotional intelligence.

Chemist Warehouse's profit power waning?

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The AFR reported that the private company that operates a large chunk of the powerful Chemist Warehouse retail pharmacy chain may have passed its peak when it comes to profit growth. It had a tougher time in 2016-17, according to financial statements lodged with the corporate regulator only on Monday. Chemist Warehouse is notoriously private and has an estimated market share of more than 25% of Australia's highly competitive pharmacy market. Its partner entity, East Yarra Friendly Society, which houses many Chemist Warehouse pharmacy outlets, generated revenue of $300.9 million in the year ended June 30, 2017, according to the financial statements lodged with ASIC. This was 25% less than the $400 million in revenue reported by East Yarra in the 2015-16 financial year. Profits slid to $12.96 million in 2016-17 compared with $101.2 million in the previous year, which appears to have been a high-water mark. However, both directors, Jack Gance and Mario Verrocch said in the latest statements they considered the 2016-17 results to be "satisfactory" considering the changes to business operations.
19
Mar-19
Tuesday

Myer trialing RFID technology

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The AFR reported that Myer is looking to reduce theft and supply-chain costs and boost sales by installing radio frequency identification or "smart" tags in its $500 million private-label brands. The beleaguered department store chain is at the forefront of a major push by Australian retailers to explore the benefits of RFID. Myer started testing RFID tags in September 2017, applying the thumbnail-sized tags to technology products sold in its flagship Bourke Street store in Melbourne. Many Australian retailers have trialed RFID technology unsuccessfully, time will tell if Myer can be one of the first to pull it off. In the meantime, there are many other areas of operation that, in our assessment, Myer should be focusing on - what about simply having staff on the shop floor to take payments when customers want to buy something?

Target brings DTC brands in store

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DigiDay reported that Target is out aggressively pitching so-called DTC brands with new deal terms, signaling a balancing of power in wholesale retail. The company now sells formerly online-only brands including Casper, Harry’s, Barkbox, Quip and Native. They all have an aesthetic instantly recognisable by online shoppers — or really anyone who has experienced targeted ads on social media. They have established customers, and troves of first-party customer data thanks to the direct-to-consumer launch strategyThey’re attractive players for Target to get its hooks into, and as the cost to advertise on Facebook and Google climbs and online growth slows, digital brands need new retail outlets to both increase brand awareness and drive customer acquisition. Target is not alone, Walmart and Nordstrom are also rewriting the rulebooks of merchandising in order to accommodate trendy digitally native brands. It's an interesting approach, as it reduces sales cannibalisation from brick and mortar. But, it does need extra merchandising and logistical effort.    
18
Mar-19
Monday

ACCC eyes the $170b franchising sector

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The AFR reported that Rod Sims, chairman of the competition watchdog, the Australian Competition and Consumer Commission (ACCC), is itching for the government to reform the $170 billion franchising sector. It follows a damning parliamentary report released last week that put the spotlight on the sector and found inherent conflicts of interest and an entrenched imbalance of power between franchisees and franchisors. It found the current regulatory environment "manifestly failed to deter systemic poor conduct and exploitative behaviour and has entrenched the power imbalance" between franchisors and franchisees. When a sector accounts for almost 8.9% of GDP and has been described in a joint parliamentary report as comparable to the financial services sector when it comes to poor corporate governance and cultural issues, it is time for the government to act.

Three banks in line for Bain Capital's Retail Zoo

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The AFR reported that private equity bigwig Bain Capital is close to finalising a lead manager syndicate for one of its key Australian assets, Boost Juice owner Retail Zoo. Bain is expected to tap Citigroup - which has been on the Retail Zoo ticket for some months - as well as rival investment banks Goldman Sachs and UBS. It comes as Bain considers exit options for Retail Zoo, including the sale to a trade buyer or another private equity firm and a sharemarket listing on the Australian Securities Exchange. The private equity firm bought Retail Zoo and its juice chain business Boost Juice in 2014, in a deal valuing the business at $185 million. Retail Zoo has since been pitched to potential acquirers as "Australia's leading multi-brand QSR platform" with store numbers growing at about 40 a year to be approaching 600 stores.  
15
Mar-19
Friday

Kogan launches online marketplace

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The AFR reported that Kogan.com has taken a leaf out of Catch Group's playbook, launching an online marketplace to boost sales and better compete with Amazon and eBay. The marketplace enables third-party traders to sell goods on Kogan.com, as they do on Amazon.com.au, Catch.com.au and eBay, and increases the range of products available to customers, without Kogan.com having to buy or hold the inventory. Kogan.com said many leading retailers and brands had already signed up, boosting the number of products to more than 100,000, including brands such as Microsoft, Breville, Lego, Fisher-Price, Paw Patrol, SodaStream, Gillette, Gucci and Philips. The new marketplace promises to reinvigorate Kogan.com's sales growth, just as it has at Catch Group, which launched a marketplace in June 2017.

Zip targets everyday spending in share grab

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The AFR reported that Afterpay competitor Zip Co will target daily spending such as groceries and fuel in its rush to grab a share of the growing alternative payments market, the company's co-founder Peter Gray said after the buy-now, pay-later group raised $42.8 million from institutional investors to fund further investment in products, customer acquisitions and strengthen its balance sheet. Zip's capital raising comes after a strong run for Zip and Afterpay, and as a host of me-too offerings are being brought to market from the controversial buy-now, pay-later segment. Unlike Afterpay, Zip has said it will focus on growing in the local market, though it is planning to expand to New Zealand.

Technology expertise matters

33
The Wall Street Journal reported on a recent study conducted by the Massachusetts Institute of Technology’s Center for Information Systems Research. MIT found that companies with experienced technologists on their board outperform others in multiple areas. Revenue growth over three years for boards with tech-savvy directors was 17.6% compared with 12.8% for boards without technology experts. Similarly, market capital growth over three years was 31.3% compared with 23.3%. The study covered 1,233 publicly traded companies with revenues over $1 billion.
 
14
Mar-19
Thursday

Sigma rejects API takeover bid

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Business Insider reported that Sigma Healthcare has turned down a merger offer from Australian Pharmaceuticals Industries, saying it stood to gain more if it continued operations as a standalone company. API, which owns the Priceline chain of pharmacies, quietly lobbed a $727 million bid for Sigma back in October, though it was not announced publicly until December, when API upped its shareholding in Sigma to 13%. Investors were not impressed with the news, wiping almost $82 million off Sigma's market capitalisation. Citi analysts estimated API would need to lift the bid price to about 73¢ per share from its offer that valued Sigma at 69¢ per share. If the two companies were to come together, the single entity would be the country's biggest pharmaceutical wholesaler. Sigma and API together would account for 45% of the market, which would make it larger than EBOS, with 36% share, according to UBS.

Zip in trading halt ahead of capital raising

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The AFR reported that Afterpay Touch rival and buy-now, pay-later provider Zip Co has gone into a trading halt before a capital raising announcement. Zip said in an ASX announcement that it would raise capital from "sophisticated and professional investors". Its shares last traded at $1.66 on Tuesday and will stay halted until Friday or when the proposed raising is completed. The credit card disrupter narrowed its net loss to $6.8 million for the six months ended December 31, from a $14.6 million loss a year earlier. Its revenue more than doubled to $34.2 million in the same period after signing up major retailers including Bunnings, Target and Officeworks. Unlike its competitor Afterpay, Zip's immediate focus remains on expanding in the Australian market.