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Sigma to shut warehouses and cut staff

Nine Finance reported that Sigma Healthcare will lay off 300 warehouse employees and let go another 200 agency staff as it adapts to the loss of its My Chemist/Chemist Warehouse supply deal. Sigma reported a 33.7% fall in full-year profit on Thursday and said it will close distribution centres in Shepparton, Victoria; Newcastle, NSW and Launceston, Tasmania late this year. The layoffs involve those workers and other staff across its distribution network. The layoffs are part of what Sigma's plan to save $100 million over two years based on recommendations from global consulting firm Accenture. The company currently has 15 distribution centres serving 4,000 pharmacies across the country, making over a million deliveries a day.

Myer cuts a further 50 jobs

The AFR reported that beleaguered department store chain Myer has promised customers will not be affected by another major redundancy program. Myer chief executive John King has cut another 50 jobs, mainly in marketing and merchandising roles and store administration, in an attempt to reduce labour costs and pressure on margins as sales continue to slide. More job cuts are likely when Myer starts shrinking its store network by handing back floor space to landlords. On a positive note, Myer shares have jumped 48% this month after Mr King delivered the retailer's first underlying profit growth in eight years by pulling back on discounting to boost gross margins and counter weak sales. Mr King, the former CEO of UK department store House of Fraser, has warned that revenues will be "lumpy" over the next year but Myer can grow earnings nevertheless by cutting costs and abandoning profitless sales.

Officeworks defends against Amazon with experience

The AFR reported that Officeworks has unveiled its latest defence against Amazon, opening the world's largest office supplies store where customers can test pens, paint and office chairs while experimenting with voice technology and home automation. The new store in Mentone in Melbourne's south east is almost 6500 square metres, four times the size of the average Officeworks store, and carries about 35,000 products, more than double the number in a typical store. Mentone customers will be able to book a home visit from Geeks2U, the tech services business Officeworks acquired earlier this month, and order customised sports and corporate gear from ONTHEGO kiosks. Officeworks has also taken a leaf out of Bunnings' playbook, opening its first in-store cafe and playground.

Another fad seems to be over

The Wall Street Journal reported that Bitcoin is in the longest slump of its 10-year history, forcing even ardent supporters to shelve dreams of global disruption and focus on simply outlasting the downturn. Also wounded in the crash have been many companies and technology platforms that promised to transform institutions from Wall Street to Silicon Valley, and raised billions of dollars through initial coin offerings.  Bitcoin now trades below US$ 4,000, massively down from its peak of US$19,650 in December 2017.

Bunnings to roll out full e-commerce offering

The AFR reported Bunnings is cutting expenses in stores to offset the cost of the biggest investment since its ill-fated expansion to the UK: selling its entire product range, from packets of screws to pot plants and garden sheds, online.  Bunnings managing director Michael Schneider expects Bunnings to have a fully transactional website offering more than 60,000 products in 18 months. However, Analysts fear the cost of establishing and operating a full e-commerce offer, including click and collect, home deliveries, staff picking orders from shelves and developing online content such as DIY videos, will crimp Bunnings' margins, which are currently the highest in the world in home improvement.

Big W faces huge rise in wage bill

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

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?

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.

Myer trialing RFID technology

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

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.    

ACCC eyes the $170b franchising sector

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

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.