The Reject Shop has had a tough year. Their annual results indicate a sales decline of .8% and a decline in profit from $16M last year to -$16.9M this year. While some of the loss is due to write downs, trading appears to be challenging for the group.
I think any business that pitches low prices on known brands as the key reason to shop with them will always be vulnerable to attack from others playing the same game.
Genuine differentiation is key in retail. The best differentiation is one where you have control, where it is your asset and therefore is not easily copied.
The Reject Shop plays in a range of categories important to newsagents. It is worth taking the time to read their annual report and to look carefully at their businesses. It includes this from the Acting CEO:
The sales decline was compounded by a reduction in our gross margin which reduced through the second half. The reduction in margin was the result of the following factors:
- a response to competitive price pressures which resulted in price roll backs;
- increased markdowns to clear product in support of simplifying the shopping experience; and
- as a result of responding to the shift in elements of the merchandise strategy which resulted in clearance activity.
Additionally, we experienced a significant increase in our shrink results on the prior year. We are progressing through a plan to reduce the impact of shrink.
I am concerned about the Reject Group will work with UK”s Card Factory in Year 2020 in this annual report, for 2 reasons:
Firstly, the existing card and wrapping suppliers to Reject Group might lost considerable business from Reject, and reduce offers to newsagents and other independent retailers.
Secondly, the existing newsagents might be impacted on their sales, as in history, Card Factory has very strong offer on greeting cards in UK. 8 years ago, I had asked one rep of a major greeting card company, where she brought the greeting cards in UK.
She answered “Card Factory”.