Retail bulletin - June 2016

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Following the vote to leave the EU we will, of course, keep a close eye on developments and provide updates.

Click here if you would like more details on how we can support your business.

Contactless Technology and Security

With a mere tap of one's card on a terminal, contactless credit and debit cards let us make payments of up to £30 without so much as a PIN. As of February this year, there were 84 million contactless cards in use in this country, and with widespread usage has come concern about security and fraud.

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A Brief Overview of What Innovation Means in Retail

For those coming to the retail landscape with fresh eyes, a sensible place to start is with an understanding of where retailers are trying to effect change. Where are the stalwarts of retail lending their energies, or at least watching closely, to give them an edge? In other words, what's new?

You'll see these three themes popping up with some frequency: beacons, omni-channel and innovation culture.

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Setting Online Minimum Prices - Risks Heavy Fines

In May 2016 the Competition & Markets Authority ("CMA") imposed substantial fines on suppliers in the bathroom fittings and commercial catering equipment sectors for engaging in online resale price maintenance with some of their retailers for specifying the minimum prices that the retailers could advertise for sales of the suppliers' products over the internet.

On the 21 June 2016 the CMA published an open guidance letter to retailers and suppliers on restrictions on retail pricing and compliance with competition law.

It is foreseeable that other cases like these may follow in the retail sector (not just in these particular markets) given the CMA's current focus and attention. Now is the time to review your position and compliance program.

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Retail sales rise for Ocado

Despite the competitive market and ongoing price deflation, Ocado has reported retail sales which have risen by 13.9%, this equates to £582.9 million. The grocery etailer has posted pre-tax profits which are up by 18%, to £8.5million.

These profits were recorded for the period of 24 weeks to 15 May 2016. The rise in profits is attributed to Ocado broadening its range and providing "market leading service levels". This includes on-time delivery of 95% of its orders.

In addition to rising sales, Ocado can also boast an increase in the number of its active customers. This has increased by 14.9% to 541,000.

This shows a general trend in British shopping towards buying groceries online, something that will come as welcome news to Amazon in the wake of its "Fresh" grocery announcement. Last month, Amazon confirmed that it would bring the Fresh grocery offering to the UK. Ocado has maintained that this is a positive development which it would welcome. Heightened competition can be a benefit for the market as it encourages more consumers to make the switch to online shopping.

Ocado was formed in 2000 and floated on the London Stock Exchange in 2010. Last year it recorded its first annual profit before tax (a hard earned £7.2 million). The addition of Wm Morrison to its portfolio of online grocery stores (Morrison's joined Waitrose in an online Ocado offering in 2013) seems to have boosted business for Ocado. sales reached around £200 million after the first year of trading.

Following the progression of the retail sector towards investment in technological innovations, Ocado has begun testing new fulfilment and software solutions. These tests are taking place in Andover. Ocado is hoping to move towards go live, and out of the testing phase, by Autumn 2016. The "Ocado Smart Platform" would be sold to other retailers, outside the UK, looking to build an online grocery offering. Ocado are now looking beyond their own retail brand, and additionally are focusing on how they can assist with building other, complimentary brands, using the retail tools already in their possession.

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