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D E B O R A H W EI N S W I G M A N A G I N G D I R E C T O R
F U N G G L O B A L R E T A I L & T E C H N O L O G Y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m
U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9
C N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6
November 4, 2016
52Days• Amazon has announced 52 days of Black Friday
deals that start on November 1 and run untilDecember22.
• Consumers can shop the deals on Amazon’swebsiteandmobileapp,andPrimememberscanshopexclusivedealsthroughtheEchodevice.
• Customers canalsouseAmazon’smobileapp toscan packages and seewhat is inside, or use itscamera feature to look for similar items on thewebsite.
1) This week’s note “From the Desk of Deborah Weinswig”discusses the likelihood of Amazon becoming a majoritymarketplace, in terms of share of unit sales, in the fourthquarter.
2) Black Friday deals have not variedmuch in the past severalyears.Adsandcirculars forretailers suchasTarget,Walmartand Best Buy look almost identical this year to how theylooked inpast years, featuringnearly the same discountsonthesameproducts.
3) German grocer Lidl is set to sell online in Spain, followingsimilar moves in Belgium, Germany and the Netherlands. Acompany representative stated that Lidl will not be able toneglect thedigitalizationtrend,but that itwill alwaysaimto“guaranteequalityatthelowestprice.”
4) WalmartisrelaunchingitshypermarketconceptinBrazil,withthe opening of Walmart Tamboré in São Paulo and therebranding of BigNovoHamburgo in RioGrande do Sul andBig Santa Felicidade in Parana as Walmart outlets. Thecompany is investing R$1 billion (US$309 million) over thenext three years in the rebranding of the Big supermarketsandintherelaunchofthehypermarketconcept.
WhenAmazonannounceditsthird-quarter2016resultsonOctober27,mostmediacoveragefocusedonitssubstantialmissonbottom-lineexpectations.Butwewerealsolookingcloselyatanothermetric:theshareof unit sales generated by third-party sellers. Andwe sawwhatwewere expecting. In the third quarter,Amazonannouncedthatfullyhalfof itsunitsalesweremadebythird-partysellerson itsmarketplace,uponepercentagepointfromthepreviousquarter.
Giventhisshare’ssteadygrowthtrend,weexpectAmazontobecomeamajoritymarketplace,byshareofunit sales, in the fourth quarter. In the kind of definitional detail that only analysts really worry about,Amazonwouldthereafterceasetobeclassifiedasaretailer.
Amazon:ShareofUnitSalesMadebyThird-PartySellers
Source:Companyreports
AmazonMarketplaceLikelytoOvertakeeBay
AmazonMarketplace’sstronggrowthisputtingitoncoursetoovertakeeBayintermsofannualglobalgrossmerchandise volume (GMV) in 2016; GMV is the value of all goods sold, nomatterwho sells them.WeestimatethatAmazonMarketplacegeneratedGMVofaround$69billionin2015versuseBay’s$78billion—butAmazonMarketplaceisgrowingmuchfasterand,so,shouldleapfrogeBaythisyear.(IntermsoftotalGMVincludingdirectretailing,AmazonisalreadyfaraheadofeBay.)
MoreRetailersAreCompetingintheMarketplaceWars
Other retailers are following Amazon’s lead by pushing intomarketplace formats. In the US,Walmart isramping up its marketplace by bringing new sellers on board. It has also acquired Jet.com and madeinvestments in JD.com. In Europe, apparel pure play Zalando has launched amarketplacemodel for bigfashionbrands.
• We analyze the marketplace segment in more detail in our forthcoming report, OnlineMarketplaces:DisruptingRetail.KeepaneyeoutforitonFungGlobalRetailTech.com.
• Black Friday deals have not varied much in the past several years. Ads and circulars forretailerssuchasTarget,WalmartandBestBuy lookalmost identical thisyear tohowtheylookedinpastyears,featuringnearlythesamediscountsonthesameproducts.
• Retailersclaimtheyarecateringtoconsumers’preferences,butexecutivessaythatpartofthe samenesshas todowithminimizing risks for a key shoppingholiday. Thatplay-it-safestrategycould,however,beturningoffholidayshoppers,whowillcontinuetoturnonlineifphysicalstoresoffernothingnew.
• Holiday shoppersprefer tobuygifts fromonlinemarketplaces rather than from individualretailers’ websites, according to a survey by search marketing firm NetElixir. Of 1,000consumers surveyed, 42% said theyweremost likely to buy a holiday gift from an onlinemarketplace,suchasAmazonoreBay,while43%saidtheywouldstillbepurchasinggiftsinstores.Only15%saidtheywerelikelytobuyfromaretailer’swebsite.
• NetElixir says Amazon will have a big holiday season as a result. The firm estimates thatAmazonwillgrowitsshareofonlineholidaysalesto28%thisyear,upfrom26%lastyear.Thatwouldtranslateinto$21.5billioninsales,comparedwith$18.0billionlastyear.
Thisweek, theFungGlobalRetail&TechnologyUS teamattendedaroundtableevent calledOmni-Channel:CompletingtheIntegratedExperiencePuzzleattheMassachusettsInstituteofTechnologyinCambridge,MA, and also attended Kroger’s investor conference in Cincinnati, OH.Our Hong KongteamattendedtheCantonFair,aChineseimportandexporteventinGuangzhou,China.
• NewYork–based luxury brandRochambeauhas created a designer, connected jacket thattakesexclusivity toawholenew level.Only15BrightBmbr jacketswillbeproduced foralimited-editionrun.
• ThegarmentfeaturesasmartchipthatgiveswearersrewardssuchasVIPentrytocertainclubsandexclusivemenu tastings atpartner restaurants.Buyerswhowear their jacket toThe New Stand—an experiential retail store where the first 15 jackets will be sold—willunlockpersonalized gifts such asmusic videosor signedpiecesof art. The jacketwill alsoserveasaninvitationtoRochambeau’s2017runwayshow.
• Sales at Pandora’s concept stores grew by 26% year over year and contributed 62% ofrevenue.NetprofitwasDKK1,405million(US$208.3million),upnearly40%yearoveryear.The company reiterated its financial guidance and confirmed that it expects full-yearrevenuestobeinexcessofDKK20billion(US$2.9billion).
• GermangrocerLidlissettosellonlineinSpain,followingsimilarmovesinBelgium,Germanyand the Netherlands. Lidl Spain’s General Director, Michael Aranda, confirmed that thecompany has staff working on the online launch, but he did not confirm the date of therollout,accordingtoSpanishnewssiteEfeagro.com.
• Aranda stated that Lidlwill not be able toneglect the digitalization trend, but that itwillalwaysaimto“guaranteequalityatthelowestprice.”
• In order to fight fraud, the EuropeanBankingAuthority intends tomake itmandatory foreveryone to use a card reader while making online payments in excess of €10 (US$12).However,banksandonlinemerchantsfeelthismovemaybeunnecessary.
• Emota, a European interest group forweb shops, believes that customerswho frequentlyshop with an online retailer should be able to make payments more easily, and thatfraudulentpurchasesusuallyoccurinsmallamounts,sothisrulemaynotserveitspurpose.
• BritishretailerHMVhasreestablished itselfas theUK’s largestmusic retailerbyovertakingAmazon in physical entertainment sales in the 12 weeks ended September 25, 2016,accordingtoKantarWorldpanel.Duringtheperiod,HMVattracted41,000newshoppersandincreaseditsshareofthephysicalentertainmentmarketby3.1percentagepoints.
• KantarnotedthatAmazonlostabout14%ofitscustomersinthephysicalmusicmarketandthat thecompanyexpects thedecline toaccelerate in thecomingmonthsas it focusesonpromotingitsAmazonMusicUnlimitedstreamingservicethatlaunchesinearly2017.
• BritishretailerMarks&SpencerreportedlyplanstocloseitsflagshipChamps-ÉlyséesstoreinParisaspartofCEOSteveRowe’sstrategytocutcostsandspurarecoveryinperformance.The company declined to comment on the matter, but is expected to make anannouncementduringastrategyreviewconferencewithinvestorsonNovember8.
• Former CEOMarc Bolland opened the 15,000-square-foot store in Paris as one of his firstmoves when he took the helm in 2010. Since Rowe assumed office earlier this year, thecompany has undertaken severalmeasures to curb costs, including eliminating about 525headofficejobsandcuttingpremiumpayfornonregularhoursworkedbystorestaff.
ASIATECHHEADLINESAlibabaBoostsEntertainmentBusinesswith¥10BillionFund(October31)Reuters• Alibaba has announced a plan to form a new digital media group by reorganizing its
Japan’sMana.boRaisesUS$2.4MillionasItShakesUpJapan’sCramSchools(November1)TechinAsia• Japaneseonline tutoring startupMana.bohas raisedUS$2.4million in fundsas it plans to
China’sMobiketoExpandintoSingapore(October31)e27.co• Chinesebike-sharing startupMobike has set its eyes on Singapore’s cycling community by
announcing its plan to trial its bike-sharing service in the country. The trial marks thestartup’sfirstforayintoanoverseasmarket.
• Mobike, founded in2015, allowsusers to locatebikes through its appusingabuilt-inGPSsystem.Userscanthenbookabike15minutesbeforepickingitupandunlockitusingaQRcode.
HondatoOpenArtificialIntelligenceCenterinTokyo(October31)TechWireAsia• Japanese carmaker HondaMotor has chosen to headquarter its artificial intelligence (AI)
researchhub inTokyo. Themovewillconsolidateall thecompany’s currentAI teams fromSiliconValley,EuropeandTokyo.
• BrazilianluxurymalloperatorGrupoIguatemiexpectsthatitsrevenueswillbegintooutpacethose of its rivals beginning this year. The company is analyzing acquisitions within thestrugglingretailsectorinBrazil.
• Despite the downturn of the Brazilian economy, Grupo Iguatemi has been resilient, asBrazilians have turned to buyingmore in Brazil and brands have reduced theirmargins inordertostaycompetitive.
• Walmart is relaunching its hypermarket concept in Brazil, with the opening of WalmartTamboréinSãoPauloandtherebrandingofBigNovoHamburgoinRioGrandedoSulandBigSantaFelicidadeinParanaasWalmartoutlets.
• Constellation Brands, owner of Corona andModelo beer, said it would buy a brewery inMexicofromGrupoModelo,asubsidiaryofAnheuser-BuschInBev,forUS$600million.ThebreweryisexpectedtoserviceConstellation’sbiggestmarketsontheUSWestCoast.
• The Obregon brewery is expected to produce 4 million hectoliters after the deal goesthrough. Constellation is building another brewery in the region, which will produce anadditional5millionhectolitersbyDecember2019.
• Deforestationcausedby theexpansionofavocadoorchards isproving tobemuchgreaterthanpreviouslythought.AnenvironmentalprotectionagencyinMexicosaidalmost50,000acres of forestland are converted to agricultural uses each year in the western state ofMichoacán,whichistheworld’stopproducerofavocados.
• Between30%and40%ofannualforestlossinMichoacánisduetoavocados,andamatureavocado orchard uses almost twice asmuchwater as a dense forest does, causing issueswithinthesurroundingecosystems.