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19
Oct-18
Friday

Roger David enters voluntary administration

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Business Insider Australia reported that Roger David, Australia’s third largest Australian menswear retailer, has succumbed to the retail crunch and increasing competition online and has gone into voluntary administration. The 76-year-old company says it couldn’t compete with global retailers operating in Australia and with digital sites. Its 57 stores, with 300 staff, will continue to trade under administrators for the time being. Combined with tough market conditions, this situation is yet another example of how out of control utility prices have hit discretionary spending hard with serious consequences for specialty retailers.  

Afterpay faces a bumpy three months

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The AFR reported that Afterpay is in for a volatile three months as buy now, pay later schemes - which consumer groups say exploits a loophole in lending laws - will be put under the microscope as part of a new Senate inquiry into parts of the finance sector. Payday lenders and debt management firms will also come under scrutiny. Afterpay, not unlike Uber and other technology businesses, has been savvy enough to stay one step ahead of legislators until now, but a correction was imminent from the start. Lending laws aside, let's not forget that buy now, pay later offerings have also been great for retailers, attracting consumers back into stores.  

New Look to exit China, close 120 stores

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Reuters reported that British fashion group New Look will exit China and close its remaining 120 stores in the region by the end of the year. The decision to exit China is part of an ongoing review of New Look’s international strategy. The retailer has been battling In March, New Look staved off a potential administration when British creditors and landlords backed a restructuring plan enabling it to close 60 UK stores. New Look has an impressive story of previous success and their current woes confirm how difficult it is to run a successful fashion business, especially in the current climate.
18
Oct-18
Thursday

The Reject Shop hit hard by low spending

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The AFR reported that discount retailer The Reject Shop has blamed stagnant wage growth and rising household costs for an alarming drop in sales. The retailer's shares plunged as much as 40% yesterday to 12-month lows after it slashed its December-half net profit guidance from $17.7 million to between $10 million and $11 million. The Reject Shop's CEO blamed, "the extremely weak retail environment". This story confirms what we've noted in today's post about retail challenges in Australia - soaring utility prices have hit discretionary spending hard with serious consequences for specialty retailers.

Retail challenges in Australia

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We just attended a briefing by the Chief Economist from NAB. His data confirmed our long-held view that online sales are sucking profits out from many retail verticals. Consequently, retailers who can engage digitally to bring customers to their brick and mortar outlets should give preference to this model, rather than try to increase online sales. The Digital Path to Purchase needs to become the new paradigm for specialty retailers, replacing the current siloed arrangements, which encourage online and store teams to compete, to the detriment of the enterprise as a whole.  NAB’s CE also pointed out that recent, massive increases in utility prices (energy, rates etc. going up by 20%) have dampened discretionary spending, seriously impacting specialty retailers.
17
Oct-18
Wednesday

Kaufland ramps up for Aussie rollout

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The AFR reported that German discount retailer Kaufland is stepping up its plans for expansion into Australia with an additional $60 million capital to assist in the roll-out of its stores and new headquarters. The chain which operates more than 1,250 stores across Europe is expected to open its first two hypermarkets in Australia in fiscal 2019 with plans to open 32 stores in Australia by 2023. Kaufland has been described as the German version of Costco, without the membership costs, and analysts believe that due to the vast range of products it offers, the “big two” won’t be the only ones to feel the heat from this new competitor - Kmart and Big W will likely also be hit.

Amazon AU adds pantry food range to online offering

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The AFR reported that Amazon has added food to its online offering in Australia, stepping up pressure on Coles and Woolworths to invest in their online grocery offers. Amazon AU will start selling groceries such as tea, coffee, and tinned goods as well as specialty, health and organic foods sourced from more than 400 Aussie and international brands. The e-commerce giant has also established a one-day delivery service in select locations, prompting Coles and Woolworths to start testing express two-hour deliveries. We've said it time and again, there is a real danger in trying to compete head-on with Amazon in the digital space. Woolworths and Coles should be investing in store experience and better value for customers rather than trying to continually keep pace with Amazon. Such a strategy would serve them well against Aldi too.
16
Oct-18
Tuesday

Tech stocks take a hit in ASX slump

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The AFR reported that the share market has been undergoing a correction in relation to technology stocks. It mentioned Afterpay, which saw its share value decline around 30%. The adjustments in ASX follow a near-correction by the Nasdaq Composite Index last week, the home of the FAANG stocks Facebook, Amazon, Apple, Netflix and Google. From its record high two months ago to last week's lows, the tech-heavy index fell more than 9%.

Adyen teams up with Gap Inc.

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WWD reported that Gap Inc. has teamed with unified payments provider Adyen, to install the company’s technology in more than 150 stores in Europe. Adyen commented that its payments platform will enable Gap and Banana Republic to provide a consistent experience across its markets. Retail Directions powers both the Gap and Banana Republic stores in Thailand; we work with Adyen on making its payments technology available to our clients worldwide.

Two stories about US retail sales figures

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Mainstream media continues to demonstrate its lack of understanding about the retail industry. Reuters reported that “US retail sales increased modestly” because “retail sales edged up 0.1% last month”.  In reality, US retail sales are absolutely booming, at 4.7% up  compared to September last year.  This is against the background of low inflation and full employment, and despite interest rate hikes. We wonder whether the US economy is showing signs of overheating?
15
Oct-18
Monday

One third of households to adopt 5G for their internet

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The AFR reported that new research found that one in three Australian households are interested in subscribing to 5G wireless services for their home internet connection. The finding further threatens the already troubled NBN - the fixed-line network has been plagued with endless rollout and performance issues. 5G is capable of speeds up to 20Gbps, which is much faster than the 100 Mbps most NBN customers are limited to. We called out this situation back in 2015 in an article about how misguided the NBN is as a national technology initiative.

Aldi calls out supermarket loyalty schemes

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News.com.au reported that Aldi has hit out at Woolworths and Coles in a new campaign, calling their loyalty programs ‘schemes’ that benefit shareholders, not shoppers. Aldi's view is that supermarket loyalty programs “manipulate” shoppers potentially costing Australians up to $1500 each a year as they desperately try to accrue enough points for a toaster while forgoing actual savings at the checkout. But Woolworths and Coles have said Aldi’s calculations aren’t a true reflection of how customers accrue points and rewards can be earned far quicker. However, a lecturer in Psychology at the University of Tasmania said loyalty programs can make people “less rational” with their shopping. You don't have to be a professor to know that both Woolworths' loyalty scheme and Coles' wingless Flybuys are pretty much gimmicks. BTW: Aldi doesn’t have any loyalty programs and each location it opens takes customers away from Coles.