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Bloomberg recently posted a few charts that show the weakness restaurants have felt over the past few months due to less trips, lower cost groceries, more at-home meal kits and new supply exceeding population growth:
Sales growth at North American restaurants in the second quarter was the slowest since 2009
Grocery prices have declined for 10 straight months while restaurant prices increased
Restaurant growth has been outpacing US population growth
Despite headlines about poor profitability from Amazon, the underlying sales numbers continued to grow aggressively. Third quarter sales growth was up 29% with product sales and service sales up 21% and 50% respectively. The total net is slightly down to last quarter but the 2nd best quarter of growth over the past several years.
North America specific sales was slightly down to last quarter's growth rate with 26% whilst International total sales grew 28%, the second highest growth rate in several years.
Most noteworthy is third party sellers now account for roughly half of all unit sales on Amazon. This is incredibly important as third party sales are extremely profitable for Amazon, further fuel the product selection and require no inventory investment from Amazon. Take note that 32% of total net sales for Amazon are now driven in services.
This past quarter reminds of several years ago when Amazon reinvested all profits into further fueling the buildout of distribution centers and international expansion. As the stock has appreciated in the profitable quarters of the past two years, Amazon has ratcheted up the investments once again. That investment has led to a miss in profits in the short term with the hope for significant improvements over the longer term. Will those investment eventually payoff? I wouldn't bet against Amazon when you focus on the underlying sales strength of this past quarter.
Previous quarter recap can be found here.
H/T: @whunterthomas
Microsoft's recent renaissance has been impressive. With that said, their hardware sales still pale in comparison to bigger hardware rival Apple. Context is everything (via Jackdaw):
Kantar Worldpanel recently released their online grocery findings. The report included a breakdown of current online grocery shopping by country. South Korea is considerably ahead with close to 17% and the United States is under 2% as a percentage of total grocery shopping. Worldwide figures are ~4.4% with a projected rise to 9% by 2025. I personally believe that while that seems like a rapid ascent in just 9 short years, it will likely exceed 9% much sooner. With investment from the likes of Amazon and Ocado paired with offerings such as Blue Apron...Grocery is already starting to feel the effects.
Walmart said Thursday that it plans to significantly slow its efforts to open new U.S. stores, a strategic shift by the world’s largest retailer as it works to claim more of the shopping dollars that are rapidly moving online.
At a meeting with investors, Walmart executives said the chain will open about 35 supercenters next year, sharply lower than the 60 it expects to open by the end of the current fiscal year. It aims to open just 20 of its smaller, grocery-oriented Neighborhood Markets, a pullback from the 70 it is to open this year.
Walmart finally playing catch up with other leading retailers who have killed all new stores and in some cases are shrinking their footprint with store closures. The revived focus on online sales is good to hear, but growth at the rate needed just isn't there yet:
The goals executives laid out for its digital business were ambitious: They say they expect to deliver 20 to 30 percent annualized growth in a segment that lately has not shown nearly that level of momentum. For example, last quarter, Walmart’s global e-commerce sales were up 11.8 percent over the previous year. In the last full fiscal year, the company’s online sales were up 8 percent.
Investments in personal shoppers powering the buy online pick-up curbside is showing promise but will take quite a bit of time to roll-out to 4,600 stores and sounds almost department store like:
This is why the personal shoppers show customers items such as produce and eggs before packing them into the car. The idea is that if someone saw an avocado that wasn’t quite ripe or an egg that was cracked, a substitution could be made on the spot.
Personal shoppers also are supposed to get to know the preferences of repeat customers, so they might learn, for example, if someone likes their bananas a little on the green side. They might also slip your dog a biscuit or your child a lollipop.
Although I believe Walmart is headed in the right direction, I believe a harsher reality is on the horizon. Having a Walmart within 10 miles of 90% of the American population is a benefit that has stopped paying benefits and is now a liability. Store closures and smaller footprint stores is the only healthy way of setting the business up for success in the evolving online shopping world.
Amazon may not be touting its efforts in public, but behind the scenes it has been trying to expand its footprint in the ad business, digital media executives say.
To date, Amazon’s ad business has mostly focused on driving online sales with targeted ads on sites across the web, leveraging its rich supply of shopping data culled from years of operating a massive e-commerce business. It can, for example, help an advertiser target people who have recently searched for men’s apparel products.
Externally they have been quiet, but driving sales internally on their own sites is massive. For those brands that sell on the platform, Sponsored Product ads as Amazon labels them are a major component to being successful. Not all brands have organic reach on the platform that provide instant traffic. Ads are just another service Amazon provides in the flywheel that drive further monetization on their platform for 3rd party sellers.
Costco and Sam's Club have historically been thought to be "Amazon proof" due to the size and quantity of products purchased by their loyal membership base. I have always argued otherwise as Amazon offers similar bulk purchase options and truly provides a thoughtless and frictionless service. Costco and Sam's have recognized that threat and worked to provide shipping via Google Express and buy online, pick-up in-store. Have their efforts paid off?
Yes and no. Cowen recently provided the graphic below that highlights how quickly the Amazon Prime membership base has grown as a percentage of households. The offering of free 2-day shipping is complimented by free streaming of music, TV, movies and books.
When diving down into the overlap of memberships, it looks as though whilst Amazon has grown, the amount of households with memberships from 2 of the 3 (Amazon, Costco and Sam's) have also all grown. The Amazon/Costco combo grew 6.5% whilst the Amazon/Sam's combo grew 3.7%.
So what does this all mean?
August was down slightly to July and up 2.0% to August 2015. This was a slight miss and many of the recurring themes of growth and decline remained the same.
The top 3 growth businesses were internet retailers, health stores and restaurants/bars:
On the downside, the bottom 3 (excluding gasoline) remained the same:
The Non-store (online) continues to steal the show and shows no signs of slowing with grocery now picking up the move to online. Additionally, Grocer growth has been outpaced by restaurant and bar spending for the 10th consecutive month.
July Retail Sales can be found here.
June Retail Sales can be found here.
May Retail Sales can be found here.
April Retail Sales can be found here.
March Retail Sales can be found here.
February Retail Sales can be found here.
January Retail Sales can be found here.
December Retail Sales can be found here.
The second Amazon bookstore is upon us. Placement within the mall sounds prime:
The San Diego shop premiered with little fanfare on Sept. 7, and is now open daily during regular mall hours. The 3,500 square-foot venue is located in the Sears wing of the upscale mall, next to the Tesla store and across from the Apple store.
Recent panel at GrowCommerce in NYC in August. Topic was based on one of my favorite topics: To Sell or Not to Sell on Amazon? Competing in an Amazon Centric World.
Majority of the results are in. Quarterly results are best told in charts. Department stores struggled with only JC Penney posting a positive year over year result:
Off-price retailers posted at least a 4% increase year over year with Burlington and Nordstrom Rack posting the best results of 5.4% and 5.3% respectively. Dollar stores remained positive but have definitely slowed in the past few quarters:
The latest round of results continues to highlight the shift happening specifically within brick & mortar from traditional department stores to off-price and dollar stores. Here is a chart depicting that shift over the last four quarters:
July was flat to May and up 2.3% to July 2015. This was a miss to expectations. With that said, there were some major bright spots:
The top 3 growth businesses remained the same:
On the downside, the bottom 3 (excluding gasoline) remained the same:
Last month we mentioned Non-store (online) being in a steep inflection point. This continues as the assault on grocers has picked up steam recently. The continued weakness in Electronics and Department Stores with combined weakness in Clothing Stores highlights why Non-store (online) is doing so well. Many of the same recurring themes here.
June Retail Sales can be found here.
May Retail Sales can be found here.
April Retail Sales can be found here.
March Retail Sales can be found here.
February Retail Sales can be found here.
January Retail Sales can be found here.
December Retail Sales can be found here.
Q2 comp sales reporting has begun. Most retailers saw an improvement over last quarter but JC Penney was the only traditional retailer to post a positive year over year quarterly sales increase. A couple of themes:
Earnings on-tap: TJX on 8/16 and Ross on 8/18.
Amazon recently launched Amazon Prime via Amazon.in. The shipping benefits are very similar to other markets:
Why pay Rs.100 for One-Day Delivery every time you need an item quickly? As a Prime member, get unlimited FREE One-Day and Two-Day Delivery to over a hundred cities in India. Choose from eligible items in the country’s largest online store, no minimum order size needed.
Prime members also enjoy discounted Same-Day, Morning and Scheduled Delivery to pin-codes in Delhi, Mumbai, Bangalore, Hyderabad and more cities across India.
Video benefits are still to come:
You will enjoy a wide selection of Bollywood and regional movies, US TV shows, and more. And you will also be able to access Prime Video anywhere: on the go or in the comfort of your living room. We will continue adding new and exclusive content, including new original Indian TV shows. Stay tuned for more.
Amazon is providing a 60 day trial vs. the typical 30 day trial they have used in the US and Canada. The price is currently listed at ₹999 (approximately $15 USD) with a introductory price of ₹499 (approximately $7.50 USD).
Flipkart, a key Amazon competitor in the Indian market provides a service called Flipkart First promising free next day delivery and discounted same day delivery. The cost of that service is also ₹499. The service first launched in 2014 and provides no video streaming benefits.
Bezos and Amazon haven't been shy about their belief in the long term viability of success within the Indian market. I wouldn't anticipate the ₹499 price moving higher anytime soon.
Facebook now has 1.7 billion users accessing the platform every month worldwide.
Of those 1.7 billion users, 66% access the platform daily.
Revenue growth worldwide year over year was 33%.
That growth was driven largely by the US & Canada that is now earning $14.34 per user for a 54% increase year over year vs. 49% last quarter. The US & Canada average revenue is now 3x that of the next closest market Europe. By comparison, Europe grew 40% on a much smaller base.
Facebook largely remains a US & Canada story. The acceleration in the latest quarter shows no slowing for the top market but Europe and Asia must show acceleration to ensure Facebook further diversifies.
Amazon reported earnings this past week that showed acceleration in almost all areas. First point to note was the strongest year over year quarterly net sales for both product and services in the past 5 years. The second quarter saw growth of 31% with product sales and service sales up 23% and 53% respectively.
International sales posted the strongest year over year quarterly net sales whilst AWS cloud services slowed from the torrential growth rates of previous quarters. This is likely due to the expanded Prime Now rollouts in the UK and further traction within India.
Third party sellers have been gaining about 1% per quarter since Q1 2015 as total units sold by 3rd parties made up 49% of units sold. Combined with increased revenue from AWS, services now account for 31% of total revenue.
This was a gangbuster growth quarter for Amazon. This quarter was especially impressive as the law of big numbers has yet to set in. The guidance range for next quarter was an increase in revenue of 22-30%. There is no slowing down Amazon with these types of numbers.
Incredibly informative and thorough piece by MacStores on the top grossing iOS apps. Some takeaways that you might have assumed:
1. Free apps rule all
2. Given top apps are free, they monetize through in-app purchases
3. Top apps typically have 10+ in-app purchase opportunities that are <$9.99
4. Games rule all
5. Top app shops include King, EA, Big Fish, Zynga, SGN. All games.
This past week PayPal and Visa announced a partnership in which Visa will allow users to use PayPal as a funding source when checking out in stores using Visa Checkout. So which party got the better end of the deal?
PayPal
Visa
So which party got the better end of the deal? PayPal will certainly see increased revenue opportunities with ties to Visa tap-and-pay but will the incremental revenue and incentives outweigh the higher cost of processing customer transactions via Visa in place of checking accounts? Doubtful in my opinion. PayPal's largest driver of profits was is ability to have customers pay using checking accounts. Processing payments via checking accounts is a fraction of the cost of processing fees from Visa. I believe Visa played its' heavier hand in this negotiation and came out better. There are two main pipes with volume: Visa and Mastercard. With this "partnership," PayPal increased its' reliance on the Visa pipes to run their increasing volume of transactions.