Local baby supplies businesses will take a hit when Amazon arrives in Australia
WHEN Amazon gets into the local baby supplies business, existing operators will get crushed in the rush, writes Barefoot Investor.
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WHEN Amazon gets into the local baby supplies business, existing operators will get crushed in the rush.
ANDREW ASKS: I remember you saying in a column once people should invest in companies they understand. Well, my partner and I are pregnant and have been spending a lot of time, and money, at Baby Bunting. So, it got me thinking. I have been looking at the share price and it is down quite a bit. It hit a high of $3.20 last year, then dropped below $2, but recently it has been going up again. It seems like a good investment, but is now the right time to buy?
BAREFOOT REPLIES: Over the past few years I too have dropped a large chunk of change at Australia’s biggest baby goods chain, Baby Bunting, but I won’t be investing in them. Right now Baby Bunting enjoys wonderful gross margins of 34.5 per cent — something I grumble to my wife about as we shop for strollers. However, they’ve got a stinky nappy that will soon need to be changed. In the US, Amazon has a killer membership called Amazon Moms. For $99 a year, mums get 20 per cent off nappies, ultra-low prices on everything else (to add to your virtual cart when you’re getting the nappies), free two-day shipping, plus access to Amazon FreeTime, which is an all-in-one streaming service with “thousands of kid-friendly books, movies, TV shows, educational apps and games”. When they roll this out in Australia they will crush the competition. After all, when you’ve got a newborn, there are two things in short supply: money and time. Amazon solves both. Avoid.
STAYING ALIVE ... JUST
JAN ASKS: My hubby and I have read your book and are on a Barefoot warpath. However, we have one big problem. Our mortgage is far beyond 60 per cent of our combined incomes. It’s actually more like 85 per cent and we earn decent money — I am on $95,000 and he is on $115,000. We have two young children, aged five and 11, who want things all the time. Can you recommend a saving strategy without simply saying “you bought a house that was too expensive”? We know this. Also, we live in Perth, so it has lost value. It is not finished yet, either, and we are now having to do the renovations ourselves. What can we do?
BAREFOOT REPLIES: You may be on the warpath, but the enemy has you surrounded. I get that you’re looking for reassurance, but you’re asking me to recommend a savings strategy when 85 per cent of your combined income is going towards your (unfinished) home and you have two school-aged kids who “want things all the time”. I’m good, but I’m not that good! I can only guess you bought the home when you were on a higher household income, because there’s no way a bank could-a, should-a, would-a lent you that money on your current income. I actually can’t work out how you’re keeping afloat — perhaps you have a lump sum you’re living off that you haven’t disclosed. Either way, unless you can increase your income dramatically and quickly, you’ll eventually lose your home. That’s the only way I can see you could lose the battle while still standing a chance of (eventually) winning the war. Right now, you need some good soldiers on your side. There are none better than Financial Counsellors Australia. Call them on 1800 007 007 and have them represent you with your bank’s hardship department.
PUNT RUINED FUTURE
MAX ASKS: A few years ago I was on a high income, with $60,000 in savings for a home. After being made redundant two years ago I have blown so much money gambling. I have been sliding down the slippery slope to where I find myself now, on a low income struggling to pay my credit cards and personal loans (which I used to be able to service comfortably on my income). I have $40,000 in credit card debt, $12,000 in personal loans and about $20,000 of other debt. Should I seek access to my super? If not, what can I do?
BAREFOOT REPLIES: Let me guess: you got caught up in sports betting, right? The number of young men in the same boat, and the betting companies actively target young blokes, is frightening — it really is the new pokies. There are only two winners out of this devastation: the gambling companies and the government (via taxes). For its sins, the government trickles a bit of their winnings into gambling crisis services, which can help with your all-too-common situation. You’ve paid for their services over and over again, so call them on 1800 858 858. Now, you may be able to access your super based on financial hardship. The minimum you can get is $1000 and the maximum is $10,000. You can only make one withdrawal in any 12-month period. However, you shouldn’t, for a couple of reasons. First, if you still have your addiction (or you relapse), you could end up gambling it away. Second, without any assets, it’s highly likely you’ll be advised to go bankrupt, and if that happens, your super will be protected. So repeat after me: “I will not access my super.” Max, you already know that the odds are stacked against you. All you can do now is fight. To see what that looks like, read on.
FLOURISHING FAMILY
ALEX WRITES: We spoke way back in 2010. That was the year when my husband died, I had a six-month-old baby, and I could not afford my mortgage repayments. Since then I have treated your (first) book like a bible. Now I have tripled my super, am building up my savings, and am working towards being financially independent. I just wanted to say “thank you”.
BAREFOOT REPLIES: Six years ago your family tree probably looked like a shrivelled up little sapling. Today it’s not only strong, but it’s growing into something magnificent. Make no mistake, your actions over the past six years have literally changed your family tree forever. I’m proud of you.
Read more Barefoot:
Getting a mortgage means being an adult and taking responsibility
Possible trust changes will not stop all tax minimisation
Couples need to share their money if they are going to share a life
Sort debts and savings before looking at the housing market
The Barefoot Investor holds an Australian Financial Services Licence (302081). This is general advice only. It should not replace individual, independent, personal financial advice
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