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7
Feb-18
Wednesday

The bitcoin bubble continues its burst

7
The bitcoin bubble continues its burst…  The cryptocurrency’s price slid as low as $5,995.58, falling 70% since a record high of near $20,000 in December.  The Wall Street Journal commented that the drop has been intensified in recent weeks following a global regulatory crackdown on the cryptocurrency market.

Les Wexner says online won't kill stores

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The Wall Street Journal reported that Les Wexner, the CEO of the parent company of Victoria’s Secret and the teen brand Pink, has said that shoppers want to visit stores to experience the environment and feel the products.  We couldn’t agree more – we never subscribed to the 1910 prediction that by 1920 all retail stores would be gone as everyone would switch to mail orders.  We also agree with his assessment that the internet won’t kill stores.  However, we think that his hope that the fascination with smartphones will fade is misguided.  Barring some major cataclysm setting humanity back 30 years, no one will manage to unplug Humans 2.0 from their mobile, networked chips, aka smartphones.

Aldi plans to open another 30 stores

7
News.com.au reported that Aldi plans to open another 30 stores in Australia.  Aldi already operate over 500 stores.  The business has been refining its local formula, adding more fresh foods and expanding the store size.  In the past we have repetitively predicted that Aldi would cause major grief for Coles, Woolworths and (particularly) the independents.  More pressure is yet to come…

Asia Pacific arm of Steinhoff is working on refinancing debt

6
The AFR reported that the Asia Pacific arm of Steinhoff is working on refinancing about $500 million of debt, in parallel to efforts aimed at a management buyout.  This apparently would cost close to $1.5 billion.  Michael Ford, Steinhoff’s AP CEO commented – quite rightly – that the local business can operate without its parents.  Steinhoff’s local brands (Harris Scarfe, Best & Less, Fantastic Furniture etc.) were successful in their own right, before becoming a part of Steinhoff’s stable.

Stock markets in the US seem to be levelling off

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Stock markets in the US seem to be levelling off, with a slight rebound towards the end of trading on Tuesday.  However, the prices remain volatile.  The Australian Financial Review commented that we are witnessing a peculiar situation where an overflow of good news spooked the market. People started to worry about an overheated US economy, and possibly inflation and interest rates jumps.  In our view, prematurely.  US economic fundamentals have strengthen, but the US long way to go before the recently freed gears start to move faster.

Bunnings UK, a lesson in "we can do no wrong"

6
The media have been commenting extensively about the massive loses of Bunnings in the UK.  The Bunnings case illustrates the dangers of the ‘we can do no wrong’ attitude and should act as a stern warning for other retailers - to carefully consider what possibly could go wrong before they embark on acquisitions and other large-scale ventures.  Successful companies include humility in their core values – for a very good reason.

Gary Perlstein attempts to buy City Chic

5
Manoeuvres around the Specialty Fashion Group are continuing.  According to The Australian, the outgoing CEO - Gary Perlstein - is attempting to buy out the most successful brand (City Chic), with backing from Ian Miller and Geoff Levy.  We wonder whether the board would ever endorse this, because that would leave the rest of the business stripped of its valuable unit.  In our view Gary Perlstein’s consortium would have to pay more than the current valuation of the entire business in order to have a chance of getting its bid approved.

Kaufland close to opening first store down under

7
German chain Kaufland is getting close to opening its first Australian store.  This will add to the woes of Coles, Woolworths and the independents.  The Australian commented that even Aldi and Costco will feel the pinch, as Kaufland operates very large format stores, with very wide offer.  Apparently the first site will open in Adelaide, adding to Kaufland’s portfolio of over 1,200 outlets in Europe.  It is also likely that at some stage we will see Lidl stores in Australia (the same parent company), competing head on with Aldi.

Retail landlords face an era of lower rent

5
The troubled Oroton business struggles to come out of administration.  The potential buyer, Will Vicars, has been having difficulties in getting landlords to agree to lower rents and two stores have already closed.  The landlords seem to be oblivious to what’s coming their way – the era of lower rent.  More and more retailers are prepared to walk out if they cannot be given a rent relief.  The dynamics for brick and mortar stores has changed and unless landlords understand this, they will soon have a lot of vacant stores.

Best Buy to stop selling CDs

5
US Today reported that Best Buy in the US has notified its suppliers that it will stop selling CDs on July 1, reacting to consumers' shift to digital music. Revenue for streaming services such as Apple Music and Spotify has surged in recent years while CD sales slumped, according to the International Federation of Phonographic Industry.
6
Feb-18
Tuesday

Bunnings UK business considers next move

5
According to Inside Retail, Wesfarmers’ MD commented that all options are on the table for Bunnings UK business.  This follows a $1.3 billion write down related to Bunnings UK/Ireland and Target.  At the time when Bunnings announced their entry into the UK market, it sounded to us like a pretty serious gamble: a concept originally based on Home Depot, refined to work well in Australia, to be implemented in the UK by converting an existing business that operated according to a different formula?  It clearly violated the principles shared by Justin Cohen how NOT to enter a foreign market.