I’m terrible at getting gifts.
For my wife, I’ll usually buy an experience. Last year it was a high tea experience.
The reason I try not to buy clothes, trinkets or jewellery is because it’s bloody hard to stay on top of women’s fashion!
It’s why, if I do end up getting a physical gift, I’ll ask my wife what she wants first. It takes out the surprise aspect. But it also means she won’t be getting a surprise she doesn’t want.
This year my mission is to get her some things from Lululemon and Lorna Jane.
Both retailers are cashing in on the active wear trend we’re seeing. Interestingly enough, the latter is now pushing into China. The Australian Financial Review writes:
‘The founders of active wear business Lorna Jane are preparing to set up their first physical stores in China to capitalise on rising demand as more than 10 parties, including global private equity and trade buyers, eye a majority stake in the operations.’
I for one think it’s a brilliant move. China has a massive pool of consumers, willing to pay up for quality international brands.
But it’s not the only opportunity for Aussie retailers.
Right now, there are a handful of retailers on the ASX slowly digitising their operations. Not only will these businesses look a lot more like tech stocks in years to come.
You could also make a pretty penny, betting on which ones rise to the top.
Retailers adopting tech
To get a good idea of what our retail industry might be like, it’s worth looking to China.
Alizila wrote earlier this year:
‘In the overall picture, brands and retailers are trying to decide whether e-commerce is friend or foe.
‘…There’s no such quandary 8,000 miles away in China, where the “either-or” retail equation is being pushed aside in favour of a model, called “New Retail,” melding the best of both the in-shop and online experiences.
‘Leading the way is Alibaba, which operates the country’s largest e-commerce platforms and has more than half a billion consumers shopping on its marketplaces. Online sales penetration in China is the highest in the world, but brick-and-mortar retail still accounts for more than 80% of total retail sales.
‘Realizing that the future of retail will not be a question of online vs. offline, Alibaba founder Jack Ma unveiled the New Retail concept two years ago. Though still young, it’s already a game-changer for many different types of retail experiences in China.’
What is New Retail?
It’s not just a supermarket or online store. It brings the best of both worlds together. A good example is Alibaba’s Hema supermarkets. Alizila continues:
‘At first glance, Hema looks like most other supermarkets: It sells groceries, fruits and vegetables, and fresh seafood. But this is not your typical grocery store.
‘…Shopping at Hema is a smartphone-powered experience—you can do it from home or in the store. When you’re in the store, you’re able to scan a bar code with your phone to get product information. Payment is also cashless, done through the Alipay platform embedded in the Hema app.
‘For some, Hema’s “hook” is the ability to choose your own fresh seafood and decide whether you want it to go home with you—raw or cooked—or have it prepared to eat in-store.
‘For those who live within three kilometres of the market, Hema’s ability to deliver in as fast as 30 minutes is its best asset. Each store serves as its own warehouse and logistics centre that collects, fulfils and delivers customer orders as fast as they come in, online or offline.’
Even the mom and pop stores in China are adopting loads more tech to improve earnings.
They’ve got inventory management systems and central warehouses. They collect data on customer insights and provide an in-store tech enhanced experience.
I wouldn’t expect to walk into your local milk bar and see the same thing. But it’s a possibility for Aussie retailers in a few years’ time. [openx slug=inpost]
Making tech gains on retailers
It’s not hard to imagine online retail not making up a larger chuck of total spending in a few years’ time. It’s also safe to say our in-store experience could get a whole lot better with the help of a little tech.
One Aussie retailer working on their digital presence is Specialty Fashion Group Ltd [ASX:SFH].
Specialty Fashion once owned brands like Millers, Katie’s, Rivers, Crossroads and Autograph. But in a decision this year, the company sold all of the above to Noni B Ltd [ASX:NBL].
The only brand they kept was City Chic.
According to Specialty Fashion, City Chic was one of their most profitable brands. It was also one of their fastest growing brands.
The latter was likely due to the company’s online push. In 2018, about 36% of City Chic sales were online.
Specialty Fashion also said they would revamp stores and how consumers bought their products. The company is pursuing activities like drop shipping.
This is where inventory never actually makes its way into a store. Rather, the product is shipped, via a third party directly to the customer.
Another Aussie retailer, Premier Investments Ltd [ASX:PMV], is on track to doing something similar. The AFR writes:
‘Last year Solomon Lew’s Premier Investments invested about $10 million to move retail brands such as Dotti, Portmans and Just Jeans onto a new e-commerce platform designed to make it easier for customers to shop on mobile phones.
‘The investment crimped Premier’s 2018 profit growth but has started paying off through higher conversion rates, which have risen more than 30 per cent.’
OK, so it’s not on the same level of Hema.
But Specialty Fashion and Premier Investments could both see sales grow in a big way as they digitalise their businesses.
Investors that bought both stocks at the start of 2018 would have made roughly 800% on Specialty Fashion and 22.8% on Premier Investments.
The former is far more than what you’d find with the majority of tech stocks this year.
I don’t suggest you blindly follow investors into either stock. But it’s worth running your finger over a couple of Aussie retailers as they slowly turn into Asian tech retailers.
Your friend,
Harje Ronngard