Alibaba > Walmart

Alibaba reported earnings last week highlighting a few points:

  • $485 billion in Gross Merchandise Volume (GMV) making Alibaba larger than Walmart ($482 billion). Walmart got started in 1962, Alibaba got started in 1999.
  • 423 million annual active buyers on platform with 410 mobile monthly active users
  • 24% growth in GMV and 39% growth in revenue
  • Fastest growing business is cloud computing albeit on a much small base

Alibaba's comprehensive service offering led by traditional ecommerce via Tmall to factory/SMBs ecommerce via Taobao fueled by financial services and cloud computing has created unmatched scale in today's rapidly changing retail environment. The internet, mobile and China's scale have led to Alibaba creating a behemoth in just 17 years vs. Walmart's 54 years.

 

 

Source: http://www.alibabagroup.com/en/ir/presenta...

Retail & Digital Disruption: Intrigue, Immediacy and Frictionless

Had the honor of keynoting the HUG Talk Listen Learn Conference in San Antonio, TX earlier this week. The entire talk was centered on who, how and where the world of retail needs to focus on to ride the current wave of change. Topics such as Alibaba, Amazon, mobile, Uber, virtual reality are all a part of the discussion. Video to be posted at a later date, but here is the SlideShare. Enjoy!

Alibaba: The House That Jack Ma Built

Recently finished Alibaba: The House That Jack Ma Built. Enjoyed the book and came away with a better understanding of Jack Ma's vision and personality at the heart of Alibaba. Even more importantly, learned more about the Son/Ma fallout and Alipay split from Alibaba. Book seemed to rush the recent years but left me with a number of staggering stats and learnings listed below. Definitely worth the read for those looking to better understand the Chinese ecommerce market.

  • Now a new model is emerging, one centered on catering to the needs of a middle class expected to grow from 300 million to half a billion people within ten years.
  • “Iron Triangle,” the key underpinning of the company’s dominance today: its strengths in e-commerce, logistics, and finance
  • Just as Google is synonymous with searching online, in China to “tao”7 something is shorthand for searching for a product online
  • For every person in China there are only six square feet of retail space, less than one-quarter the space in the United States.
  • Already more than 40 percent of Chinese consumers buy their groceries online as compared to just 10 percent in the United States.
  • In China, the e-commerce gold rush has stimulated the rise of more than eight thousand private courier firms, of which twenty major companies stand out.
  • By far the most popular online payment tool in China, Alipay handles more than three-quarters of a trillion dollars a year in online transactions, 3 times the volume of PayPal and one-third of the $2.5 trillion global online payments market.
  • Jack Ma on MBAs: "Most MBA graduates are not useful. . . . Unless they come back from their MBA studies and forget what they’ve learned at school, then they will be useful. Because schools teach knowledge, while starting businesses requires wisdom. Wisdom is acquired through experience. Knowledge can be acquired through hard work.”
  • Crucially for Alibaba, SARS convinced millions of people, afraid to go outside, to try shopping online instead.
  • Without WeChat a cell phone in China loses much of its utility. The WeChat app effectively has made the contact book redundant. Most users check the application at least ten times a day.
  • By the end of 2015, JD.com had surpassed Tmall by some estimates to become the leading e-commerce player in Beijing.

 

Source: http://www.amazon.com/gp/product/006241340...

Amazon & High End Fashion

In news quietly released over the weekend, Amazon and Moda Operandi announced a deep partnership. The partnership includes the ability to login using your Amazon account, pay via your Amazon account and even alert Moda sales associates when an Amazon app customer walks into one of their two stores in London or NYC. 

This is significant for a number of reasons:

  • Amazon has been aggressively pursuing high end brands to list on the various Amazon sites to be viewed as more respectable in the fashion world. Moda is known for the highest end of apparel and allows preorders of styles seen on runways across the world.
  • Despite having its' own bookstore in Seattle, Amazon has never linked mobile location to store visits. Using the Amazon app, Moda sales associates will be alerted of Amazon customers and be provided click & collect/buy online pick-up in-store options.
  • This partnership further extends Amazon's fashion offering into the most prestigious fashion brands (Oscar de la Renta, Dolce & Gabbana, Burberry) in the world.
  • Many retailers and brands get caught up in defining Amazon as a competitor yet Amazon fail to realize its' high customer satisfaction rating and grasp of customer journeys starts on their various sites.

With 47% of shopping searches starting on Amazon, I applaud Moda Operandi's effort to tie up with the soon to be largest apparel seller in the world. If done well, partnerships like these are the tip of the iceberg for Amazon within the fashion world.

Source: http://www.seattletimes.com/business/amazo...

Worth A Click: 4/19/16

  • Overstored. And this is just the beginning. Link
  • In the future we will photograph everything and look at nothing. Link
  • Here come the Germans with Lidl and Aldi. Consumers will benefit: Aldi's prices are 24% cheaper than Walmart's and 21% cheaper than Dollar General's, according to a Deutsche Bank price check in northern New Jersey. Aldi's prices are also 10% lower than Save-A-Lot and 22% lower than Kroger's, according to another pricing study in Nashville. Link
  • Ocado's Uphill Battle To Deliver Abroad. Link
  • The Future Of Microsoft Office: Many Apps, Many Interfaces, Many Devices. Link
  • Global PC shipments were down close to 10% in Q1 2016, the lowest since 2007. Link
  • Netflix may allow you to download movies. Things always change when times get rough or competition steps it up. Link
  • CVS uses startup Curbside to launch buy online pick up at curb. Link
  • Visa to speed chip checkout with new software upgrades. Link
  • India is the smartphone market everyone has their eyes set on. Micromax is flooding the market with new handsets. Link

March Retail Sales

March sales marked the third straight month that sales were flat to down. Total retail sales were down 0.3% to February and up 1.7% to March 2015. Compare the year over year to February's 3.1% and you see the big misses within Auto, Building materials and Clothing stores. A few highlights from March:

  • Building material & garden equipment had the largest percentage gain of 10.8% versus last year but down from the 12.1% last month
  • Motor vehicle and parts dealers were up 1.5% versus last year but down from 6.8% last month
  • Clothing stores historically have been putting up 2-3% growth but were only up 0.1% year over year
  • Sporting, non-store (online) remain strong year over year with 6.1% growth
  • Restaurants continue to lengthen their lead on grocery 
  • The Electronics vacuum of sales to online continues with a decline of 2.1%
  • Department Stores multi-decade decline continues with a decline of 6.1% year over year
  • Online retailers continue to post rates above 6% year over year

The trends for strong Sporting, Building and Online retailers continues. The continued weakness in Electronics and Department Stores with combined weakness in Clothing Stores is showing a weak 1st Quarter emerging. If we see further revisions downward, earnings in the coming quarters will likely result in lower than anticipated gross margins as retailers will need to "buy" the quarters through markdowns. 

February Retail Sales can be found here.

January Retail Sales can be found here.

December Retail Sales can be found here.

Source: https://www.census.gov/retail/marts/www/ma...

Teens & Amazon

From a recent Piper Jaffray Companies' 31st semi-annual "Taking Stock With Teens" research survey with 6,500 respondents across 46 U.S. states:

Amazon ranked first among websites, with a  41% “mindshare.” Its closest competitors, Nike and Forever 21, both had a 5% share. In a related finding, the survey found that Amazon Prime adoption, which  has increased across all income brackets in each of the past five surveys, continues to expand and now exists in 51% of households of the teens in the survey. This survey, along with other previous Piper Jaffray consumer surveys, suggests that there are 57-61 million Prime households in the U.S.
Source: http://www.retailingtoday.com/article/stud...

Worth A Click: 4/9/16

  • A.I. Assistants like Siri, Alexa and Cortana are terrifyingly convenient. Link
  • Sears borrows another $500 million to assist in funding transformation. Link
  • Amazon may be violating India's new rules on foregin eCommerce. Link 
  • When a cell phone almost ruins your relationship. Link 
  • The trouble with iPhone's 3D Touch Peek/Pop is there really is no need for it.  Link
  • How Buzzfeed got 800K concurrent live viewers on Facebook to watch an exploding watermelon. Link 
  •  Cars that drive themselves that cost $20k. Link
  • H&M struggles amidst dollar strength and increased comepetition from LOWER priced rivals. Link 

Worth A Click: 4/7/16

Several newsletter and blog readers have requested daily links to sites, articles or thoughts I come across. Therefore I will start a "Worth A Click" post of similar themes to my newsletter: retail, tech and finance. I can't promise this daily and can't promise the amount of content. I won't waste your time if something isn't worth a click and do promise to give you my view. Without further ado, here is the "Worth A Click" for 4/7/16:

  • New Kindle will bring solar charging and extended battery case. Didn't realize the battery was an issue.Link
  • Replacing your laptop with an iPad Pro for 2 weeks. Spolier: Don't. Link
  • Twitter to livestream NFL Thursday games. Always loved the platform but Wall Street fell out of love once growth slowed. Fantastic move to increase relevance and re-engage Wall Street interest. They won't make money off of ads during the game but it may help in the growth department. Link
  • 3-D printed Rembrandt. Link
  • Unbundling continues. Starz is latest network to launch monthly channel at cost of $8.99.
  • Etsy allows you to launch your store outside the Etsy.com site. Link
  • Chat app Kik allows you to launch your own bot. Link
  • Facebook suggesting businesses to chat with within Messenger. Link
  • Target integrates manufacturer coupons within their Cartwheel app. Link
  • Asos closes in China. Alibaba proves to be too much. Link
  • Alibaba is officially larger than Walmart. Link
  • Bots are all the rage almost overnight. Line is latest to release. Link
  • You can now order Taco Bell on Slack via bot. Link
  • Dominos releases its' version of Amazon Dash. One button ordering via app. Link
  • A fleet of trucks just drove itself across Europe. Link
  • WeWork launches livable space service named WeLive. Link

Retail Chart Porn

This past week had an extraordinary number of charts outlining social, digital and media trends disrupting retail.

Chart 1: Millennials don't use Facebook? That's a lie. Facebook destroys all competition in average monthly minutes per visitor and reach:

Chart 2: Despite the Facebook dominance, Snapchat is on the rise and making headway outside of teens:

Chart 3: Google's Chrome browser is about to overtake Microsoft's Internet Explorer:

Despite popular belief social media is a small driver of traffic to sites. Search, direct and affiliate are the top 3:

Chart 4: For the first full year, more clothing was sold online than electronics:

Chart 5: Global shipments of Android, Apple and Windows devices vs everything else:

Chart 6: Digital continues to disrupt physical sales in a number of categories:

Flock to Where the Eyes Are

Reading this interview and quote from one of the cofounders of Stripe reminded me of what retailers often forget regarding apps:

  • Building an app is expensive
  • "Buying" app downloads is expensive
  • Customers are only willing to download a select few
  • Customers only use a select few

This is not to say retailers shouldn't build single purpose apps. Just remember that given the fickle use of apps, flocking to where the eyes already are makes most sense. Brands not using apps and marketplaces that show a multitude of brands won't ever be part of the conversation. When not part of the conversation, sales and awareness suffer. As Stripe Co-Founder Collison says:

Our idea is to let retailers enable buying in the apps consumers already have installed, rather than going on a quest to get consumers to install their single purpose app.
Source: http://adage.com/article/digital/q-a-tech-...

Bezos' Focus Areas: Fashion & Private Label Apparel

Amazon's Jeff Bezos confirms what he is currently focused on: 

It’s all too much for Bezos to micromanage, and he acknowledges picking his spots. His latest passion is for higher-end fashion, an area Amazon has been upgrading in recent years; Bezos says he is focused on Amazon’s plans for its own private label. “I think there’s so much opportunity for invention there,” he says. “It’s very hard to do online. It’s fragmented offline. People value a curatorial approach.” This, he says, is a significant departure for Amazon. “We didn’t curate a selection of books.” As for Bezos’s other areas of focus at Amazon, he says he’s spending time on “certain elements of AWS, but out a few years,” as well as on Alexa and the company’s fulfillment centers. As for specifics, “I can’t really share any because it’s too much of a road-map kind of issue.
Source: hhttp://fortune.com/amazon-jeff-bezos-prim...

Gamestop Inflection Point

In January 2016, many analysts were calling for a rally in Gamestop based on strong holiday sales and positive sales comps in the 2.5% to 4.0% range. Gamestop released earnings this past Thursday and largely met those expectations:

Consolidated comparable store sales increased 3.1% (a 3.0% increase in the U.S. and a 3.3% increase internationally).

When taking a closer look at the numbers, Gamestop's largest revenue category new video game software was down year over year for the quarter. Additionally, their digital revenue was 14% year over year and now makes up a measly 1.7% of Gamestop's total business. I haven't been quiet about the competitive pressures and changing consumer habits Gamestop is facing and believe this next quarter is the inflection point for Gamestop weakness to accelerate. Just take one look at Gamestop's outlook for 2016: 

                                                 First Quarter            Fiscal Year 2016
Total Sales                                -7.0% to -4.0%         0.0% to +3.0%
Comparable Store Sales          -9.0% to -7.0%         -3.0% to 0.0%

Down to flat for fiscal 2016 means more pain ahead. Store closings and a reduction in share repurchases are inevitable. 

Source: http://investor.gamestop.com/phoenix.zhtml...

Too many emails, too little relevance

According to a new survey of more than 1,000 U.S. shoppers from customer targeting technology provider First Insight, the average consumer subscribes to 2.3 retailer email lists and receives 13.1 emails a week from these lists.
 
On the high end, 6% of respondents receive 40 or more emails a week. Two-thirds of the consumers who receive six or more emails a week said it was “too many.” Six appears to be the magic number for annoying customers with weekly emails – only 21% of shoppers who receive five emails per week think it’s too many.
 
However, retailers may want to consider cutting off weekly emails at a number far lower than five. Sixty-one percent of consumers say that their favorite retailers only send them one or two emails a week.

February Retail Sales

February sales were better than expectations with total sales down 0.1% to January and up 3.1% to February 2015. However, the January retail sales were revised from up 0.2% to down 0.4%. While the latter was quite a surprise, the year over year trend themes continue: online up, big ticket (auto, furniture) up and restaurants up. A few highlights from February:

  • Building material & garden equipment had the largest percentage gain of 12.2% versus last year
  • Motor vehicle and parts dealers were up 6.8% versus last year
  • Sporting, non-store (online) remain strong year over year with 6.7% and 6.3% growth respectively
  • Restaurants passed grocery months ago and haven't looked back
  • The Electronics vacuum of sales to online continues with a decline of 3.2%
  • Department Stores multi-decade decline continues with a decline of 2.2% year over year

Given the stats above, I would anticipate continued strong comps for home improvement players like Home Depot, online only retailers like Amazon and auto players. With that said, the revisions are concerning. If we see further revisions downward, earnings in the coming quarters will likely result in lower than anticipated gross margins as retailers will need to "buy" the quarters through markdowns. 

January Retail Sales can be found here.

December Retail Sales can be found here.

Source: http://www.census.gov/retail/marts/www/mar...

Lefsetz on Amazon Echo

This was not supposed to happen. Apple was supposed to rule the future.
That's right, while pundits were debating the merits and demerits of the Apple Watch, Jony Ive's grasp at immortality, with many fashionable elements but little utility, Jeff Bezos pivoted from his Fire phone debacle and slowly took over the world, foisting upon it a product no one knew they wanted but everyone who owns one can't stop testifying about.
The Fire phone was so last decade. Wherein you overhype something to ubiquity. Steve Jobs perfected that paradigm, to the point we were more interested in watching Apple presentations than going to the movies.
But then Steve Jobs died.
Tech is not the land of corporations, it's the domain of individuals. Otherwise Carly Fiorina and Meg Whitman would have been able to pump up HP. But they couldn't, they're both managers. And we're only interested in innovators.
For a while there Google caught our eye. Not only did its search engine do the impossible, deliver exactly what we were looking for, to the point no one even looks at the second link anymore, the company delivered Gmail and free analytics and...
Then came Google Glass. A product no one wanted paraded by the nerds running this company who were out of touch.
That's the problem with Facebook too, Zuckerberg's a nerd. He doesn't understand human relationships, doesn't realize we enjoy a modicum of privacy, doesn't know how to get along with media powers, wanting to eat their lunch via bullying.
You can argue Jeff Bezos is the same person.
But Bezos has always been ahead of his prey. And despite being a nerd, Bezos is immersed in the world of retail, he knows where the rubber meets the road, he realizes it's all about satiating customers with stuff they want.
Even corporate customers. You may not be aware of AWS, Amazon Web Services, but it's the engine of profit for the company. A new enterprise priced low at the advent, AWS hosts your favorite websites, demonstrating in the modern economy it often doesn't pay to own, but to rent, with the flexibility to grow larger or shrink smaller on a whim. While we're still fighting over access in the music industry, with the artist arguing for ownership, techies realize access is everything, that people don't want to buy, which is why record stores closed and Spotify's got a huge valuation.
And then came Amazon Video. A seemingly unnecessary me-too service in a land of frontrunners known as Netflix and Hulu, Amazon ended up cooking up "Transparent" and "Mozart In The Jungle" and suddenly its Prime members were watching.
Prime... You might consider it a fee for fast delivery, but although profitable Amazon considers it a club. Everybody wants to be a member of an organization, especially one with free perks. That's the M.O. of the future. Get people hooked and keep ladling on features, letting early adopters in for less, incentivizing members to stay attached.
Kind of like the Echo.
We didn't know we wanted voice control in the house. We kept hearing about the internet of things, but we weren't sure what it was about. Furthermore, Siri is so frustrating that many don't even bother to employ it on their phone.
Apple was there first in voice control, but it squandered its lead, it didn't see the opportunities, and now it's floundering.
But Amazon did.
It released the Echo with little fanfare and over the course of its short lifetime, a little over a year, it's become the go-to product of the day. Mobile phones have become commoditized. Apple does realize loyalty is about features/software/club membership, if you use a Samsung you're out of the loop, but if you're a loner so many mobile devices are good enough today.
But there's only one Echo.
Sonos was caught flat-footed. It's laying off workers. It knows the future is voice control.
And competitors are clamoring for market share, Echo will not be alone for long.
But it does have first-mover advantage. And it's the ecosystem that counts. Third parties are lining up to create Echo-compatible apps, to run your thermostat, your lights, your...
So you've got to give Jeff Bezos credit. He's learned from his mistakes and is still a visionary pushing the envelope.
Apple is dead. It will survive for a while on its devices, but they too will ultimately be superseded, as were Palm and BlackBerry before them.
Because there's no there there.
Music broke through because of the moguls, people who invented it along the way. Ahmet Ertegun started Atlantic with money from his dentist and then pivoted from R&B to rock. Bill Graham created the Fillmores and then closed them when they were no longer economically viable. Those growing up working for the man just don't have the same fire or insight, they haven't fought for their lives, they're used to getting a paycheck, they're more interested in ripping off the corporation than expanding it.
But Jeff Bezos is like the Beatles. Staying in the game, always giving us the unexpected.
Not Kanye. Kanye has perfected publicity. In an era where hype means ever less. We're looking for substance, we're looking for you to be one step ahead of the game. That's how we know Spotify's a winner...everybody suing and complaining about it eating their lunch. But Spotify's customers are satisfied, by this enterprise created by an outsider.
Art used to have a hold on this kind of innovation. Before corporations ruled. And the creators are as bad as the despots, they put money first and character second. Whereas the best of the techies know that remuneration comes last.
So wake up and smell the coffee. It's morning in America. One wherein devices our are servants, they will thrill us and make our lives easier.
But they depend upon our input.
What are you gonna tell your Echo to do?
P.S. Ignore the hype about Amazon opening bookstores. Few titles are involved, it's all about getting people to experience their devices and services. Think "To Serve Man," not Barnes & Noble. Amazon isn't interested in selling you a physical book, it wants to own your life!
Source: http://lefsetz.com/wordpress/

eBay's Product Hierarchy & Search Query Issues

It's no secret that browsing eBay by product categories and further refining your search query can be incredibly frustrating. Happy to see that eBay realizes this and is working with listing tools to assist. A few screens and descriptions of changes made by eBay:

Providing these types of tools will ensure better listing creation by sellers which in turn will improve users ability to refine exactly what they are searching for. The quality of listings is only as good as the seller information submitted.