Business Trends

Posts Tagged ‘Retail’

IT Spending Increases; Focus on Optimizing Processes for Fast ROI

In Uncategorized on February 25, 2010 at 12:35 am

A recent survey conducted by Altada Solution — a leading provider of software solutions for the retail industry — shows that IT budgets appear to be recovering after the initial downturn at the start of last year’s recession, with averages for all retailers at 1.3% of sales compared to 1% last year, while 26% of respondents expect their IT budget to increase; the same figure as last year. The company released findings from the 2nd annual Global Retail CIO Survey, jointly sponsored with IBM.

However, while last year’s survey showed that increase to relate to projects already underway, this year’s interviews revealed more aggressive plans to implement new systems. The survey of 109 retail CIOs and IT Directors in both the Americas and Europe was undertaken in Q4 2009 by retail industry research specialists Martec International.

This year’s Global Retail CIO Survey clearly shows that optimizing the product / place / promotion offer is becoming an increasingly critical element of retail IT spend. More than 50% of retailers will be upgrading, replacing or implementing new systems in areas such as Automated Replenishment (52%), Assortment Optimization (58%), Promotions Optimization (56%), Promotions Management (54%), with a further 46% looking to invest in Demand Forecasting. Master Data Management (MDM) has the highest planned implementation of all applications studied in the survey, both across the Enterprise (35%) and for Supplier Management (28%).

“The top line statistics from this year’s survey, and indeed last year’s, suggest that the retail sector has survived the recession remarkably effectively,” said Allan Davies, CMO, Aldata Solution. “The truth is, though, that while the downturn hasn’t halted retailers’ IT spend, it has certainly changed the way that money is spent. Gone are the days of end-to-end, rip and replace projects, and instead we’re seeing a big focus on process optimization. Retail CIOs are not afraid of investing in new projects, but they need to see a quick return on investment. And by quick, I’m talking about months, not years.”

Customer is King

Systems to attract and keep customers featured prominently in this year’s survey. Multi-channel CRM was ranked as the most important application by respondents, with 42% having yet to implement multi-channel CRM, but with plans to do so within the next three years. Similarly 38% of CIOs surveyed plan to implement Loyalty systems – with customer data linked to buying patterns and behavior – within the next three years. And finally, systems that support the safety of customers were considered the most important application by 47% of respondents.

Sustainability Not a Priority

For the first time, attitudes to sustainability were considered as part of the research. Respondents were asked to score the impact of sustainability on IT spend and strategy on a scale of 1 to 10 (with 10 being the highest). The average emerged as a lukewarm 5.1. Views appeared to be polarized, with 13% considering sustainability to have a negligible impact on IT strategy, while 6% considered it to have a major impact. In terms of which applications retailers feel are having the greatest impact on sustainability, applications for store operations came top of the list. For the future, more retailers believe that multi-channel retailing will have the biggest impact on sustainability.

Related Links: IBISWorld industry reports

Software Publishing Industry in the U.S.

IT Consulting in the U.S.

Costco Dumping Coca-Cola

In Uncategorized on November 19, 2009 at 10:35 pm

Costco customers looking for “the real thing” now have to look elsewhere: The warehouse retailer said on Monday that it’s no longer buying Coca-Cola (KO) products. Once stores run out of their dwindling supplies, they won’t be restocking.

Costco is playing hardball; negotiations between the two companies to reach a recession-ready wholesale price have apparently broken down. Costco acknowledges this problem on its Web site: “Costco is committed to carrying name brand merchandise at the best possible prices. At this time, Coca-Cola has not provided Costco with competitive pricing so that we may pass along the value our members deserve.”

Narrow Margins

It’s an uncommon move for Costco, but not a surprising one. Consumers are looking for ways to squeeze their budgets, and retailers are trying to increase profits while cutting prices. That’s been a hopeless quest for Costco this year; the 3% pretax profit margin it posted between 2004 and 2007 is now just 2.5% — a net profit margin of somewhere around one cent on the dollar after taxes, overhead, and other incidentals. With such a narrow margin, the slightest uptick translates into a major value shift.

Every 0.01% the company ekes out on its pretax profit margin translates into a one-cent increase in earnings per share, and a likely 0.5% uptick in its stock value. The superthin profit-margin model, and its major influence on stock value, follows Walmart’s (WMT) example; Walmart, with its 3.3% net profit margin, regularly strong-arms its suppliers into deals that guarantee its famously low prices.

Complicit Coke

Coca-Cola may seem like the wronged party here, but it’s complicit in its own undoing. Coke, after all, caves in to Walmart’s demand for a razor-thin profit margin by slashing its products’ prices, in return for Walmart’s massive distribution — and swamping not only Coke’s smaller competitors but Walmart’s smaller, higher-priced, higher-profit rivals.

The result of recession, unemployment, and an increasingly desperate push for profits have left Walmart, Costco, Coke, and thousands of other companies in a cannibal buffet. Having feasted on the easy pickings offered by smaller chains, these companies now find themselves eyeing each other. With unemployment still rising, retail sales won’t be getting fatter anytime soon.

In Other News: Suit Charges Coca-Cola With Profiting From Seizure of Jewish Property in Egypt

Lawyers for the Bigio family, Jewish Egyptians whose property was seized by the Egyptian government in a 1960s program to rid the country of its Jewish population, are demanding summary judgment and a jury trial to establish damages against Coca-Cola for exploiting “for immense profit” property that Coca Cola has been occupying since 1994 with the knowledge that the property was taken unlawfully from the Bigios. In a brief filed today in federal district court, the Bigios – responding to the Court’s request for supplemental briefing – spelled out the extensive web of international laws violated by the Nasser regime’s anti-Jewish campaign which included the nationalization of the Bigios’ property in 1962.

The Egyptian government has acknowledged that the property was seized illegally and rightfully belongs to the Bigios. A federal court of appeals has twice rejected technical jurisdictional contentions made by Coca-Cola. The case has been before the courts for 12 years.

“Coca-Cola is the occupier of stolen property,” said attorneys for the Bigios. “Coca-Cola has been stonewalling for years, hiding behind a veil of artificial and inapplicable legalisms and it will now be able to respond to our latest brief only by denying that Egyptian Jews were persecuted by the Nasser regime. If it makes such an argument, Coca-Cola will be engaging in the same conduct as Holocaust deniers. Such flagrant behavior will not hold up in the court of public opinion. It is time for Coca-Cola to acknowledge that the property belongs to the Bigios, was unlawfully confiscated from them, and compensate them for its occupancy and use.”

Coca-Cola was aware that the Bigios owned the land, buildings, business and machinery involved in this case because the two companies did business together for more than 20 years prior to the seizure of the properties under the ethnic cleansing campaign of Egyptian president Gamal Abdel Nasser. In 1965, the Bigio family, left destitute by the seizure of their property and business, immigrated, as stateless persons, to Montreal where they now reside.

In 1994, after it was informed by the Bigio family of the Egyptian government’s determination that the family owned the property, Coca-Cola took control of the property under various forms of ownership of Egyptian companies bearing the Coca-Cola name.

The Bigios filed a request for summary judgment September 14. Oral arguments were heard November 10. The letter brief responds to the judge’s request for legal authority demonstrating that the Egyptian government’s nationalization of the disputed property in 1962 violated international law.

Related links

IBISWorld Industry Reports
Soft Drink Production in the U.S.
Big Box Retail Stores in the U.S.

IBISWorld company profile
Coca-Cola Company
Costco Wholesale Corporation

Commodities Continue Positive Performance Across All Index Sectors

In Uncategorized on November 19, 2009 at 6:20 pm

Christopher Burton, Co-Lead Portfolio Manager for the Credit Suisse Total Commodity Return Strategy said, “The commodities market continues to perform well as global markets remain on track for recovery. Despite minor losses in equity markets, performance remains positive year-to-date. Although commodities have recovered some of their losses from 2008, we continue to believe current prices offer an exceptional entry point into the asset class, especially as central banks announce their intention to maintain low interest rates, which could lead to the stockpiling of certain commodities.”

Co-Lead Portfolio Manager, Andrew Karsh, added, “As inflation has not yet developed in terms announced by government figures, the potential for unexpected inflation remains quite high. Considering the fact that commodities are a leading indicator of inflation, we believe the time to invest in commodities is now, well in advance of lagging indicators such as in increase in CPI.”

The Dow Jones-UBS Commodity Index Total Return gained 3.28% in October as a result of positive performance from all sectors, bringing the year-to-date performance of the Index to 12.64%. Lean Hogs, continuing its positive performance from September, was the top performer in October, gaining 14.33% most likely due to the conclusion of China’s ban on U.S. pork products. Gasoline also demonstrated strong performance this month, up 10.51%, because of a larger than expected reduction of stored gasoline. Sugar was the worst performer in October as it reversed its recent gains, declining 10.16% in October, but is still up significantly, 57.63%, for the year.

Related Links

Credit Suisse Report
Clarifying Misconceptions About Commodity Indexing

IBISWorld industry reports
Commodity Dealing and Brokerage in the U.S.
Cattle & Hog Wholesaling in the U.S.
Excise – Petroleum Product Wholesaling – Federal
Global Sugar Manufacturing
World Price – Agriculture – Sugar

Entrepreneurs Haute This Fashion Week

In Uncategorized on September 4, 2009 at 10:14 pm

Fashion week is approaching and despite the recession putting a damper on retail sales, industry research firm IBISWorld ranks fashion design as one of the top start-up opportunities for entrepreneurs in 2009. As fashionable clothing is becoming more affordable and consumers start to regain confidence, the Los Angeles-based firm forecasts industry-wide recovery to take place in the second-half of 2010, with an average annualized growth of roughly 6.3 percent in the coming five years.

“Consumer attitudes toward spending are changing, and it’s shaping the direction of fashion,” said George Van Horn, senior analyst at IBISWorld. “Being style-conscious doesn’t mean people aren’t being budget-conscious, and vice versa. Successful fashion houses are those delivering style and quality with affordability, and we can expect this trend to linger for the foreseeable future.”

As the saying goes, cheap is chic. With overall prices being driven down, retailers offering luxury apparel, like Saks Fifth Avenue and Neiman Marcus, have been the hardest hit, cutting costs and discounting stock in an effort to sustain profit margins.

Industry-wide, fashion design businesses have seen significant pressures on margins in recent years, with current levels approaching 6 percent versus 30 percent only a few years ago. The need to retain contracts and ensure ongoing cash flow is yet another factor behind prices going down. Even prestigious designers are bailing on displaying their latest collections on the runway or have declared bankruptcy, such as German fashion house Escada and couture designer Christian Lacroix.

“This has certainly been a make-or-break year for fashion,” said Van Horn, who advices new entrants to differentiate their services based on smart pricing strategies, quality and creative self-marketing, rather than through reliance on advertisement. “In recent years, smaller independent designers have been sprouting like never before, largely attributed to the growing popularity of online retail, as well as relatively low entry barriers and start-up costs. This has helped give the industry the ability to move forward, despite the retail sector taking a big hit.”

Additional links

Fashion Design Services: http://ibisworld.com/industry/default.aspx?indid=1413
Clothing Accessory Stores: http://ibisworld.com/industry/default.aspx?indid=1070
Women’s Clothing Stores: http://ibisworld.com/industry/default.aspx?indid=1067
Big Box Retail Stores: http://ibisworld.com/industry/default.aspx?indid=1092
Miscellaneous Retail Stores: http://ibisworld.com/industry/default.aspx?indid=1106

Retailers Having Back To School Blues

In Uncategorized on August 17, 2009 at 4:59 pm
EconomyWith 55.8 million kids enrolled in public and private schools this fall, retailers can anticipate their usual brief stint of shoppers. But given lackluster consumer spending and a 9.4 percent unemployment rate, it is no surprise analysts at industry research firm IBISWorld expect back-to-school spending to decline by 3.4 percent – from the $20.42 billion generated in 2008.

In probing their back-to-school cost breakdown, the Los Angeles-based firm divided the following four categories into what it considered to be typical school-related expenses: electronics, traditional supplies, footwear and clothing.

“Parents will inevitably put more thought and less dollars into their back-to-school shopping strategies,” said George Van Horn, senior analyst at IBISWorld. “In particular, dollar-variety stores can expect to see a greater wave of traffic since parents are doing everything they can to save an extra buck”.  In fact, IBISWorld approximates 21.3 percent of sales from the $47 billion discount-retailer industry to come from school and office supplies alone.

The fastest growing category, electronic school supplies, will see a slight decline of 1.8 percent, down to $5.12 billion. Parents on average will spend $91.69 per child on electronic equipment this year, a fairly significant leap from the $43.36 average observed in 2005. Items such as calculators and personal laptops are must-haves in today’s learning environment, and IBISWorld predicts that by 2016, this sector will become the number one back-to-school spending category – overtaking the core area of clothing, as the learning environment becomes more technologically focused.

The biggest decline this year comes from the clothes category, expected to plunge 5.4 percent. For each child enrolled in school this year, sporting the latest trends in clothes and accessories will cost parents $136.60 on average.

And for the 1.23 million kids that will be home-schooled this year, IBISWorld found that while parents may be saving on certain expenses like clothes and shoes, educating a child at home escalates costs in other areas. In particular, parents incur the hefty price of purchasing the latest teaching tools, textbooks, and learning equipment – typically covered by public and private schools.

“Back-to-school spending is a necessary and justifiable expenditure,’” said Van Horn. “Retailers have driven down overall prices in order to entice consumers, so price-conscious parents won’t need to significantly cutback, because they will get a lot more out of their dollar this year.”

About IBISWorld, Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every U.S. industry.  With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions.  Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide.  For more information visit www.ibisworld.com or call 1-800-330-3772.

Euro Retail Sales Also Taking a Hit

In Consumer Trends, economy, Uncategorized on June 29, 2009 at 5:12 pm

According to the Bloomberg Euro-Zone Retail Purchasing Managers’ Index,  retail business conditions in Europe continued to deteriorate in June, with sales, employment, purchasing of stock and margins all falling compared with May.
When compared to May, retail sales fell in all of the three largest euro countries:

 –Germany experienced the steepest drop in monthly sales of the three, and was also the only country to record a sharper rate of decline. The index fell for a second successive month from 46.3 to 46.0, signaling the largest monthly drop in sales since March and the thirteenth successive decline. The average decline for Q2 as a whole was the smallest since the second quarter of last year.
Sales fell in France for the fifth successive month. The rate of deterioration slowed to near-stagnation to register the smallest monthly decline over this period and the best performance of the three countries. The index rose from 48.3 to 49.4. For Q2 as a whole, the decline was the weakest recorded over the past three quarters.
Italy saw sales drop for the twenty-eighth consecutive month. The index rose from 46.5 to 47.0, registering the smallest monthly decline since October 2007. The rate of contraction has moderated since the record pace seen last November, meaning the average monthly drop in sales during Q2 was the smallest since Q2 2007.

Euro area retail sales were down from June 2008. The year-on-year sales index rose from 38.7 in May to 42.7. This upward movement pointed to an easing in the rate of decline from the severe pace seen one month earlier. Sales fell from a year ago in all three countries, led by Italy, which was also the only country to see an acceleration in the rate of decline. Germany reported the weakest overall year-on-year drop.