16th May, 2017

The imminent arrival of Amazon in Australia has frightened many investors away from Australian retailers. We think that shareholders in traditional retailers should be very nervous indeed – much like the Australian media sector, the transformation of Australian retailing has barely begun.

The US retailing sector is much further down the painful path to re-invention, simply because the US is where most of the successful online retailers originated. US e-commerce sales rose from 10.5% of all sales in 2012 to 15.5% in 2016. As the chart below shows, more stores have closed in the first four months of this year than in the whole of 2016. Retail companies are going bankrupt at unprecedented rates: the ratings agency Fitch estimated in April of this year that the bond default rate by retailers would leap from 1% in the last twelve months to 9% by the end of 2017… [read more]