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10
May-19
Friday

The human side of retail automation

6
The AFR reported that the growing trend of automation raises the question of whether retail workers will be redirected to other tasks or have their hours slashed. The article comes off the back of Walmart joining Amazon in the retail robot revolution. For example, the Auto-C robot has relieved Walmart employees of several hours of daily cleaning, helped keep staff customer-focused and mitigated the need to hire extra maintenance-tasked employees. However, for those retail employees who fear that they may soon be out of a job, there is another side to the story. Employee hours are actually increasing during the initial deployment of technology when they need extra training. Some Walmart employees have reported that the limited capabilities of automated machines have actually increased workload and the pressure to "pick up the slack".

Retailers batten down the hatches as wage winds rise

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The AFR reported that shop employees are set to feel the fallout of new wage agreements, as retailers minimise their impact by tightening rosters, automation and simplifying processes. Retailers such as Woolworths, Coles, Bunnings, Big W, Kmart, Super Retail Group and Noni B are facing materially higher wages bills after signing new enterprise agreements that restore weekend and evening penalty rates and casual loadings. Retailers whose employees are covered by the general retail industry award, such as  JB Hi-Fi and Harvey Norman, are also facing higher labour costs, with the award expected to rise more than 3% in 2019 after rising 3.5% in 2018 and 3.3% in 2017. According to Citigroup research, a 1% increase in wage costs would reduce earnings before interest and tax at Myer by 5.7%, Woolworths by 3.1%, Wesfarmers 2.6%, Super Retail Group 2.3% and JB Hi-Fi 1.6%. In response, some retailers, such as Myer, Country Road Group and Noni B have been cutting jobs or reducing shifts.      
9
May-19
Thursday

Chinese e-commerce giant JD.com exits Australia

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The AFR reported that Chinese e-commerce giant JD.com has closed its office in Australia less than 15 months after opening with ambitious expansion plans, part of a company-wide response to widening losses. The Beijing-based company sells Australian food, dairy products, vitamins and cosmetics to millions of Chinese consumers. It confirmed on Wednesday it had quietly closed its Melbourne office, which had opened with great fanfare and the backing of the Victorian government in February last year. JD.com said there would be no change to its service and partnerships with Australian and New Zealand exporters, which would now be managed by JD.com staff in China. It's another example that goes to show how often the media frenzy is just hype. Amazon was meant to destroy Australian retail as we know it...

Fifth Avenue losing its shine as rents fall and vacancies climb

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An article in the Wall Street Journal looks at how the rise of e-commerce is pushing rents down and increasing vacancies in all areas of US retail, from outdated malls and poorly located shopping centers to Fifth Avenue, one of the world's most trafficked and premier shopping corridors. Slumping sales and increasing online sales are making it tougher for fashion houses and other retailers to justify sky-high rents in such locations. Taking Fifth Avenue as an example, average annual ground-floor asking store rents between 49th and 60th streets were US$2,779 a square foot in the first quarter, down by 11% from its peak during the first quarter of 2017. The availability rate, which reflects vacancies, reached 25% in the first quarter, slightly down from 27.5% in the fourth quarter, the highest availability rate since it was first tracked on Fifth Avenue in 2006.    

Apple brings in new retail boss

5
Business Insider reported that Apple has a new head of retail, and employees are hoping she can bring its once-revered stores back to life. In a new Bloomberg report, former and current employees at Apple explained how the company’s stores have suffered in recent years, pointing to changes implemented by Apple’s former head of retail, Angela Ahrendts, which they said, were detrimental to the customer experience. Ahrendts’ replacement, Deirdre O’Brien, who was previously Apple’s head of human resources and has worked at the company for 30 years, recently stepped into the role and is prepping herself to take on this new challenge. She begins in earnest by opening Apple’s latest store on 11 May, an ambitious renovation of Carnegie Library in Washington D.C. Former executives say she has her work cut out for her. Apple’s stores were once heralded as the pinnacle of sophisticated and sleek shopping but increasingly, customers have complained of long lines, long wait times, and overcrowding. The situation highlights how going too far with 'customer service' can damage the business.
8
May-19
Wednesday

Find profits where rules are light

4
The AFR reported that with less red tape, disrupters such as Afterpay can mean bigger wins for risk-aware shareholders. The "go nowhere" performance of the big banks over the past five years reinforces the notion that whenever companies battle regulators, shareholders lose. The market capitilastion of Afterpay is heading for $7 billion as shareholders become more confident that the surging revenues of the buy-now, pay-later service provider won't be impeded in its home market by regulatory reform while the rollout in the US market gathers pace. This isn't a new trend, shareholders have constantly prospered from business models that challenge regulators and the trend continues. Facebook, Amazon, Netflix and Google are all trading at record highs despite pressure from various directions that they are exploiting market power and abusing privacy laws.    

Love the customers you've got?

6
The AFR reported that retailers are wasting too much money chasing new customers and should focus on keeping existing customers loyal, says British retailer Lord Mark Price. Lord Price, who ran upmarket supermarket chain Waitrose for 10 years and was deputy chairman of Britain’s largest department store chain, John Lewis Partnership, says too many retailers are obsessed with winning new customers and offering them special deals. “Love the customers you’ve got,” Lord Price told  The Australian Financial Review during a recent interview for AFR BOSS Magazine. “If you get a 5% improvement in retention rate in your customers your profits will improve between 25 and 95%. “But my view would be the vast majority of retail marketing departments focus on getting new customers, not loving their current customers. “Banks and insurance companies are especially good at it – they'll give their new people a better deal than their current people and often you’ll find retailers do the same.”

March retail sales exceed expectations

5
The AFR reported that retail sales and the country's trade surplus exceeded economists' expectations in March, with fresh signals on the economy coming just hours before the next RBA interest rate meeting, where a rate cut hangs in the balance. Australia recorded a trade surplus of $4.9 billion in March. Last month's trade surplus was also revised higher, to a record $5.1 billion, from a previous reading of $4.8 billion. Economists had been expecting a trade surplus of $4.5 billion, according to Bloomberg. Retail sales rose a seasonally adjusted 0.3% over the month. Economists were expecting a reading of 0.2% for March, according to estimates compiled by Bloomberg. February retail sales were revised up to 0.9% from 0.8%. According to the Australian Bureau of Statistics, year-on-year figures show an approximate increase of 3.5% for March 2019 over March 2018.  
7
May-19
Tuesday

Tapping retail potential

5

An article in Forbes explores the philosophy that every brand has untapped growth potential, that even mature retailers can experience new waves of topline growth. However, in order to do that, they must manage consumers’ instinctive choices. Approximately 95% of purchase decisions are made in the subconscious mind - on instinct. The article explains that the key to accelerating growth is to grow a brand’s positive associations and become the dominant instinctive choice, that a brand’s associations, both conscious and subconscious, are much more easily influenced than any of us imagine. According to the author, change must come in store, but it all starts with honing in on what you do better than anyone else and shaping the customer experience around that. The key to accelerating penetration and growth for retailers lies in making your brand the "go to" choice. The secret lies in the subconscious mind of prospective customers.

German retailers' return policies costing them billions

5
Internet Retailing reported that the generous approach of German retailers to returns is costing them billions, according to a new report. A survey by the University of Bamberg found that around 280 million parcels and 487 million articles were returned in Germany in 2018. This amounted to 16% of parcels delivered and 12% of products ordered being returned. The total cost to the industry is around €5.46 billion, with respondents citing postage and transport costs, loss of item values and labour costs associated with assessing returned items. Most retailers offer returns significantly beyond the statutory minimum of 14 days, with 28 days being the average. Another recent forecast by the German Retail Trade Association found that revenues in online trading in Germany will increase by around 9% to €57.8 billion.
6
May-19
Monday
3
May-19
Friday

BIG W in the red, but headed in the right direction?

5
Woolworths' BIG W department store chain has posted its strongest quarterly sales growth in 10 years, suggesting its latest turnaround plan – the third in four years – is gaining traction with customers. Same-store sales at BIG W jumped 7.4% in the March quarter, the strongest growth since 2009, fuelled by demand for homewares, leisure goods and household basics. This followed 5% same-store sales growth in the December quarter and a 1.2% fall in sales in the March quarter last year. BIG W has clocked up four consecutive quarters of growth and appears to be outperforming Wesfarmers' Kmart and  Target chains. However, it remains deep in the red due to high fixed costs, weaker sales of higher margin products such as clothing and high levels of stock losses and excess stock. Despite the rebound in sales, Woolworths expects BIG W to lose between $80 million and $100 million this year, taking losses over the last four years to $375 million.