Get the latest retail news straight to your inbox

    Don’t go searching for insights in the retail space, we deliver them direct.
    The week's most important retail news, delivered to your inbox every Friday.

The perils of an open returns policy

There seems to be a general consensus that good customer service requires practically an unlimited returns acceptance policy.  We have never subscribed to such a view, advocating for service consistency instead, with generous, but clear rules for returns acceptance.  Now Wall Street Journal published an article which shows where unrestricted returns policies can take retailers.  The article talks about Best Buy, who use Retail Equation to score customers’ behaviour.  As a consequence, customers can be banned... for a year from returning any stock.  How is that for inconsistent customer service?  Stores have long used generous return guidelines to lure more customers, but such policies invite abuse. US retailers estimate 11% of their sales are returned, and of those, at least 10% are likely to be fraudulent returns, according to the National Retail Federation.

US growth set to accelerate

The Wall Street Journal reported that the US Business Roundtable CEO Economic Outlook Index reached its highest level in the survey’s history. The index is a composite of companies’ plans for capital spending and hiring and projections for sales over the next six months.  Small-business owners, in a separate report released in February, noted their highest optimism in 35 years. Inflation cooled slightly for American consumers last month, keeping the Federal Reserve on track to raise short-term interest rates next week, but relieving it of pressure to take more dramatic action to prevent the economy from overheating.

Updated OECD forecast

OECD increased their economic growth forecast for Australia by 0.2% for 2018 and by 0.3% for 2019.  The same annual figures for the US economy were in excess of 1.5%.  We have commented before that Australia’s ever higher minimum wages, excessive regulation and growing taxation seem to correlate negatively with GDP per capita.  Our politicians are obviously unable to reverse such trends and boost the nation’s prosperity.

Kaufland will cause more pain for IGA, Woolworths and Coles

A few days ago we commented about Kaufland opening their first stores in Australia.  Today reported comments from DGC Advisory that the Australian market wasn’t large enough to support another major supermarket player.  On the surface, we couldn’t agree more, but DGC has made a mistake assuming that markets remain static.  We have no doubt that Kaufland will carve out a solid slice of the Australian supermarket pie and the core questions will need to be redefined: for how long will IGA survive in its present form and how badly will Coles and Woolworths be hurt? Both chains have been trying to emulate Aldi, but that’s a pipe dream if your cost of doing business is 50% higher than your competition.

Australia leads the world

Numerous media outlets reported that Unions have requested a $50-a-week increase to the minimum wage.  This is apparently need-driven, to compensate for the increase in the cost of living.  We could understand if this yardstick was applied to social benefits, but all the people ACTU is fighting for are actually employed.  Just for the record: Australia’s minimum wage is the highest in the world already (over $13 per hour).  Germany and the UK hover around $10.  Japan, US, and Canada sit in the $6-$8 range.  Interestingly, all these countries have GDP per capita higher than Australia.  A coincidence?

Oroton rescue

AFR reported that Oroton is getting close to getting its Deed of Arrangements agreed to.  The company went through a difficult round of negotiations with its landlords, with most coming to the party.  Once the DOCA is approved, the company will be taken private.  In our assessment, this will be essential – long-term projects don’t thread well at public companies…

Bunnings' UK woes continue

According to the AFR, Bunnings is reviewing its strategy in relation the UK arm of the business.  AFR reported that the review has been complicated by the recent spate of freezing weather, costing Wesfarmers precious time.  In our experience, when retailers start complaining about the weather, this signals a deeper problem…  The weather is usually the same for everyone.

Looming banking crisis?

According to Geopolitical Futures, The Bank for International Settlements, which has made accurate predictions in the past, published some ominous analyses in its quarterly review. BIS “Early Warning Indicators” identify a few countries that look particularly vulnerable to a banking crisis right now. At the top of the list are Canada, China, and Hong Kong.  Having Canada on the list surprised us.  China and Hong Kong did not.

Australia swims against the tax tide

Governments in most developed countries are hard at work to alter their tax systems to attract more investment and to boost their economies.  However, according to AFR, Australia seems to be going against this trend, with Labor Opposition proposing to extract approximately $60 billion out of taxpayers' pockets over the next decade through changes to the dividend imputation scheme.  Looks like they are following Willie Sutton’s advice: if you need money, you go where the money is.

Drone fiction

The media keep talking up drone deliveries.  The Wall Street Journal reported that the US federal government will allow Amazon and other companies to begin limited package delivery via drones in the US in the coming months. According to WSJ, other countries (including Australia!) have taken the lead on drone delivery, while the US has held back over concerns about privacy, security, and safety.  We have no doubt that these concerns will remain valid. Other than for supply in remote areas, drones will remain popular only in the media. Remember ‘flying cars’, which have been right around the corner for decades?  We have had the technology since 1945 (aka helicopters), but how many people ended up using one?

Toys R Us preparing for liquidation

The NRF reported that it has obtained information about Toys R Us preparing for liquidation, after management has been unable to reach a financial deal with lenders or find a buyer, making it likely the chain will have to shut down its US stores. The brand's UK division has already been placed in bankruptcy.  Toys R Us has been in business for 70 years and it used to dominate the toy market vertical.  It has been declining since 2000 due to the competition from Walmart, Target and more recently, Amazon.  At some stage, the business was worth over US$6 billion.