Americans are expected to open their wallets this holiday season, increasing their gift budgets even as a slowing job market and stubborn inflation weigh on consumer confidence, according to a new analysis from Visa Business and Economic Insights.
U.S. consumers are forecast to spend an average of $736 each on holiday gifts, a 10% increase from the $669 reported last year, Visa said in its 2025 holiday spending outlook.
Inflation partly explains this year’s projected sales growth, with the Consumer Price Index showing that prices rose 3% on an annual basis in September. But Americans are also planning on upping their gifting, especially older consumers, with baby boomers forecasted to boost their holiday spending by 21%, the study found.
The robust spending outlook highlights consumers’ resilience, even as confidence surveys paint a more cautious picture.
“We are clearly seeing consumers spend in a far better, more robust way than what we’re seeing in the consumer sentiment and confidence data,” Michael Brown, a principal U.S. economist at Visa, told CBS News.
Visa tapped retail sales data from the U.S. Department of Commerce — excluding automobiles, gas stations and restaurants — for its holiday spending projections.
In the years leading up to the pandemic, changes in consumer spending corresponded more closely with consumer sentiment, Visa’s analysis shows. But that link has weakened in recent years. In April, for example, when consumer confidence fell to its lowest level since the pandemic, real consumer spending increased 3.1% on an annual basis, the Visa report points out.
Consumers continue to express dour views about the economy, with sentiment falling for a third consecutive month in October due to worries about a weaker job market and rising inflation, according to the latest University of Michigan sentiment index. Another measure from the Conference Board, a nonprofit group, also shows confidence in the economy edged down slightly this month.
What explains the disconnect? Steady wage gains have kept spending aloft, with many Americans continuing to shop despite higher prices because their take-home pay remains solid, Brown said.
Other holiday outlook forecasts from groups like Abode for Business and polling firm Gallup point to the same conclusion as Visa’s: Americans are planning to dish out billions on holiday gifts, travel and food despite their gloomy views on the economy.
Still, some are exercising caution in their purchasing, Brown said, noting that low- and middle-income households will face the biggest tradeoffs this holiday season. Higher costs for essentials such as groceries are leaving them with less room for discretionary spending, he added.
“There is absolutely an undercurrent of trying to make the dollar stretch, given some of those necessities are costing a bit more this season,” Brown said.
Online, December 3, 2024 (Newswire.com)
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About AARDVARK:
Founded in 1987, AARDVARK is a leading distributor and system integrator specializing in the protection of tactical operators from local, state, federal, and military units. AARDVARK is headquartered in La Verne, California.
This month, Google dropped a few hints about how its most important and lucrative product, Search, will be changing in the coming months. Earlier this year, the company rolled out AI Overviews — generated summary blurbs that are frequently passable and not infrequently completely erroneous — to many of its customers. “This week, we’re rolling out search results pages organized with AI in the U.S.,” the company said in a blog post. The test would be limited to “recipes and meal inspiration” for now, but searchers will “now see a full-page experience, with relevant results organized just for [them].” This, Google suggested, would be an exciting improvement. “You can easily explore content and perspectives from across the web including articles, videos, forums and more — all in one place,” the company said. Not only that, but the company is testing a new design for AI Overviews that “adds prominent links to supporting webpages directly within the text.” Oh, and one more thing about the AI Overviews: Google has been “carefully testing ads” for “relevant queries.”
It doesn’t take much extrapolation to imagine AI Overviews, which are currently contained in a box above the standard and ever-more-cluttered search page, expanding from summaries to more comprehensive digests of information, with more citations, more things to tap and click, and space for sponsorship. Google’s most visible, high-stakes AI deployment is a set of tools that will automatically find and “organize” content from the web, present it in summary with prominent links, and have big chunky ads for products, not just links. Sound familiar? Google’s vision for the future of AI is… Google, again.
The prevailing narrative around Google’s current situation is that, despite its leadership in AI research, it was caught flat-footed by the arrival of apps like ChatGPT. It’s been hampered in its attempts to respond by institutional caution and clumsy moderation choices, but also by fear that revamping Search, a great product gradually undermined by an even greater business model, might threaten its underlying ad business. There simply isn’t as much room for ads, and not as much tapping or clicking, in a world where search engines start answering questions. There’s a lot of truth in this story, but it depends on an understanding of what Google has become and how people use it that’s slightly out of date.
Google is, substantially, still a platform for finding content on the web supported by ads from brands and websites. It’s also, by default, a major e-commerce platform, or at least a site through which we start to find things to buy. This has changed how the service looks and feels as well as the entire web around it. It should also change how we think about Google’s competition. Sure, it should be worried about OpenAI. But it might be more worried about… Amazon?
I don’t mean to understate the extent to which the arrival of ChatGPT and other AI services has rattled Google: It has. When Google and Microsoft showed off their first AI search demos in early 2023, they highlighted the ability to “chat” with your search engine, which would then produce, in conversational format or a clean, simple digest, links and summaries from the web. These were compelling previews of an entirely new interface. Arguably the most enticing thing about them was that they were stripped-down, simple, and did what they were asked.
That’s not quite what they ended up shipping, of course. AI Overviews, in the beginning, leaned hard into summary, attempting to synthesize full answers while minimizing outside content. They also appeared as one more widget among many, another extra box with an unclear relationship to the rest of the results page, sometimes existing in conflict with other information presented just a few inches away. Google’s previews of its “AI-organized” results pages now look an awful lot like Google Search result pages, with a bunch of grids and modules and lists remixed but ultimately sort of piled together. Google, despite suggestions that it might change everything, is rapidly circling back around to where it started:
Illustration: Google Marketing
Meanwhile, ChatGPT, which is by far the largest new competitor for Google Search, with a claimed 200 million weekly users, is formidable but strange. It’s a generative chatbot, meaning it can be prompted to do all sorts of things, but for certain search queries (or prompts) it produces a streamlined version of a familiar Google experience: Instead of providing you with a quick shortcut to a Wikipedia article, ChatGPT quickly generates something sort of like a Wikipedia article, in many cases drawn from Wikipedia articles. OpenAI is currently testing out a tool called SearchGPT, which is an explicit Google competitor: A slightly busier interface with AI summaries, link lists, and conversational features.
Illustration: Screencap
Perplexity, a smaller new AI search engine, looks a lot like a version of Google unburdened by the need to make money with ads (though it’s starting down that path) or the sorts of ethical and reputational concerns that might give a company like Google pause. It’s pretty effective in that it provides solid answers to queries with lots of sources in a relatively checkable and transparent way. Part of what makes it work, however, is that it sneaks around paywalls and “summarizes” sources by sometimes repeating them at length. It’s a solid user experience with occasionally wild flaws — a recent search for measurements on a coat resulted in Perplexity inventing an air conditioner and describing its size — and with features that are probably riskier to deploy for a litigation target like Google than for a mid-sized startup.
Still, competition from these companies isn’t yet doing much to erode Google’s actual search market share, and the companies competing in this space are pretty clearly converging on a similar and familiar point: the AI firms are trending toward cluttered, ad-ready results pages while Google is adding AI to its cluttered, ad-ready results pages. Google is right to anticipate that this could present a challenge in the long term as habits erode or antitrust actions pry them out of lucrative and useful partnerships with companies like Apple, but these are long-term problems that Google, as a wildly profitable incumbent, is fairly well equipped to deal with. While the Justice Department has hinted that remedies ranging from killing search default deals to breaking up the company are on the table, they’re unlikely to take effect for years. For now, companies like OpenAI and Perplexity are burning piles of cash, with unclear plans for monetizing search traffic. Google isn’t chasing AI companies into chatbot oblivion, in other words — AI companies are approaching Google on its own turf.
That AI companies might not be quite the imminent threat to search that Google initially imagined would be a relief for the company if it didn’t have deeper, older problems. While Google’s market share for search remains at or above 90 percent, where it’s been for years, eMarketer and Wall Street Journal report a much more shocking number:
Google’s share of the U.S. search ad market is expected to drop below 50% next year for the first time in over a decade, according to the research firm eMarketer. Amazon is expected to have 22.3% of the market this year, with 17.6% growth, compared with Google’s 50.5% share and its 7.6% growth.
Google’s biggest competitor in search adsisn’t a search engine, really, but Amazon — a dominant player (and accused monopolist) in a slightly different sector. This is a less intuitive but more significant story than the rise of AI search, at least for now. Amazon’s search product is only narrowly competitive with Google’s from a user perspective — Amazon isn’t stealing too many users away from Google overall — and it’s similarly been degraded by one of Amazon’s secondary business models, which is to get sellers and brands to pay for ads to reach Amazon search users, in theory helping them discover the right products to buy but in practice obstructing routine shopping with endless pitches for junk.
Amazon’s search is a janky, frustrating thing to use, with limited options for sorting and finding products and clutter everywhere. But it’s perfectly positioned to skim advertising dollars away from the underlying business that makes Google’s search dominance so lucrative. Everyone uses both, and Google ends up sending lots of customers to Amazon anyway. Why shouldn’t advertisers choose to spend their money on the site where people actually buy things?
Google has been aware of this erosion for a while now and has pushed hard into product recommendation content and modules of its own, with mixed results. You can see clear evidence in its new AI features, where the first ads are not for links or sites, but for specific products to buy. Google’s AI search rebirth might end up being fairly heavy on commerce:
Illustration: Google Marketing
Do people need advanced AI to figure out where to buy Tide, or to be reminded to buy it in the first place? Probably not. Even more worrying for Google, though, is that they might not need Search either. People need less assistance, not more, to buy things online.
Here’s an experiment you can run yourself. Open up a category on Amazon — Electronics, Toys, Home Garden & Tools, whatever — and scan the first page for a product listed with no obvious brand, or perhaps a semi-brand like IOCBYHZ, BANKKY, or KLAQQED. Take a look at the product photos and description, and note the price. Next, try to find the product on Temu, the discount app with the Super Bowl ads, and check how much it costs. Next, try to find it on AliExpress, the international e-commerce subsidiary of the Chinese Alibaba Group, or on TikTok Shop. Finally, you can look for it on Alibaba proper, where it might be available as well, shipped straight from China.
Sometimes, not always, but more than you might expect, this works. Take this dress from CUPSHE, listed on Amazon at $47.99, with more than 4200 ratings, mostly positive. On Temu, where it also ships for free from a “local” (read: domestic) warehouse, it’s listed as “Womens Casual Boho Lace Hem Floral V Neck Long Beach Dress Cocktail Party Maxi Wedding Dress” and costs just $16.49. On TikTok Shop, it’s on Flash Sale with free shipping for $27 dollars. On AliExpress, it’s available at lots of prices from different sellers, for $9.90 with $9.60 shipping, or, on promotion, shipped free with an alleged 85.2% chance of arriving within 14 days for $8.66.
Photo-Illustration: Intelligencer; Photos: Temu, TikTok Shop, Amazon, and AliExpress
I didn’t order these dresses, so I can’t verify that they’re exactly the same or that one isn’t a rip-off of another, nor do I know enough about boho maxi dresses to tell you if these are a rip-off of a design from outside the discount e-commerce world.
Photo: Amazon
But again, this isn’t uncommon. One popular speaker, for example, branded as T&G, is $15.75 on Amazon, $8.38 on Temu, and $4.94 with free shipping on AliExpress. It’s clearly… inspired by popular speakers from 78-year-old company JBL which also sell on Amazon, albeit for $89.95 on steep discount.
Photo: AliExpress
The process works across categories: a pair of bike shorts goes from $19.99 to $11.77 to $2.30; a folding utility wagon goes from $95 to $38.99 (indistinguishable from the one our family purchased on Amazon in 2023 for $110.59). Are these the exact same products? Maybe, and in many cases probably. It’s possible they’re made from the same reference designs by different factories; in other cases, they might be sold by the same sellers on different platforms.
But for anyone willing to take a little time to comparison-shop across big online stores, it’s clear something is happening: Amazon is becoming more like Temu, TikTok Shop, Shein, and AliExpress while Chinese e-commerce platforms are becoming, in America at least, more like Amazon. The big stores are all selling the same brandless imports from China, sometimes at wildly different prices, and converging on similar logistical strategies: Temu is shifting seller inventory to American warehouses to reduce shipping times; Amazon is planning to launch a dedicated discount section with products that ship from overseas in about a week.
In the broadest sense, this is pretty familiar stuff. Different stores offering some of the same products at different prices with different levels of convenience is the story of big-box physical retail and grocery stores, too. But this is different in some ways that are obvious and others that are more subtle. These aren’t chain stores offering occasional discounts on branded products with MSRPs, but rather marketplaces full of sellers who are individually pricing anonymous products based on fluctuations in warehousing rates, shipping, and the cuts taken by the e-commerce platforms. Additionally, the products we’re talking about range from junk to solid unbranded alternatives — this is, across the board, discount shopping. You might score a 90 percent discount on a fast-fashion shirt or some home decor dupes, but you’re not going to get a shocking Temu deal on, say, a PlayStation, although you can buy them there, which wasn’t really true when it first launched.
These companies are approaching the same e-commerce strategy from very different positions as well. Temu, an international subsidiary of e-commerce giant Pinduoduo, is spending heavily to break into foreign markets including the United States, in many cases subsidizing shipping and prices and reportedly operating at a massive loss; AliExpress has been making slower inroads with its product, which is more overtly a cross-border whole-adjacent marketplace, with long shipping times and minimal domestic marketing.
Amazon’s drift into cross-border e-commerce predates the likes of Temu and these other competitors. Since the late 2010s, a majority of Amazon’s sales have been attributable to third-party sellers, many of whom pay substantial fees to the company for logistical support (warehousing, shipping) and advertising. This strategy has been great for Amazon in a lot of ways: it shifts market research and risk to sellers; rather than stocking their own products, the company charges sellers to stock theirs; the company is now the third-largest player in digital ads, behind Meta and Google, owing mostly to fees it charges Amazon sellers to be visible on Amazon. It’s also changed the product in more complicated ways. American sellers, many of whom sourced or manufactured their products overseas, soon found themselves competing with sellers with more direct connections with Chinese factories; Amazon, for its part, courted overseas sellers. American sellers were made to look like middlemen, which in some ways they were — the companies they were building were less brands than high-ranked-and-reviewed Amazon listings, and the manufacturers they worked with knew exactly what kinds of margins they were getting.
Now, something similar is happening to Amazon as a whole. While the platform has been moving downmarket, becoming more hostile to name brands whose products are being undercut and in some cases plainly ripped off, China-based competitors are attacking it from below, working with some of the same manufacturers and sellers to cast Amazon as the middleman with needlessly high prices. While Amazon initially pushed into cross-border e-commerce on its own terms, now it’s doing so defensively.
Amazon still has huge advantages here. It’s profitable, widely liked and trusted, and still used by tens of millions of Americans to buy mainstream products from recognizable brands. Customers who use it to buy an occasional CUPSHE dress, on which Amazon and a third-party seller are collecting huge margins, are likely to be buying batteries or detergent, too. And no company, foreign or domestic, can come close to Amazon’s Prime shipping infrastructure.
But there are obvious risks, too. Customers like cheap things, but they like cheaper things more. It’s not clear that Amazon can profitably win in a race to the bottom, or that it won’t damage its reputation trying. Amazon risks making its marketplace fully uninhabitable for more established brands, and hostile to domestic sellers, some of whom have called its Temu-ish plans a “slap in the face.”
Then there are customers. An ornate nine-dollar dress on AliExpress is an ethical and environmental nightmare, a semi-disposable garment of sewn-together externalities. But so is the one on Amazon — which is also something worse, at least in the eyes of the marketplace: a really bad deal.
Amazon reported a boost in its quarterly profits Thursday, but the company missed revenue estimates, sending its stock lower in after-hours trading.
The Seattle-based tech company said it earned $13.5 billion for the April-June period, higher than the $10.99 billion industry analysts surveyed by FactSet had anticipated. Amazon earned $6.7 billion during the same period last year.
Earnings per share for the second quarter came out to $1.26, higher than analysts’ expectations of $1.03.
However, investors reacted negatively to other results, leading Amazon shares to fall more than 6% after the closing bell. The company posted revenue of $148 billion, a 10% increase that fell slightly below analyst expectations of $148.67 billion.
Amazon also said it expects revenue for the current quarter, which ends Sept. 30, to be between $154 billion and $158.5 billion — lower than the $158.22 billion forecast by analysts.
Amazon boosted its spending during the COVID-19 pandemic to keep up with higher demand from consumers who became more reliant on online shopping. But as demand cooled and wider economic conditions pressured other parts of its business, the company aggressively cut costs by eliminating unprofitable businesses and laying off more than 27,000 corporate employees.
The cost-cutting has led to growth in profits. However, Amazon is also feeling the benefits of the buzz around generative artificial intelligence, which has helped reaccelerate its cloud computing unit, Amazon Web Services, after it experienced a slowdown.
The company said Thursday that Amazon Web Services saw a 19% jump in revenue compared to the same period last year.
“We’re continuing to make progress on a number of dimensions, but perhaps none more so than the continued reacceleration in AWS growth,” Amazon CEO Andy Jassy said in a statement.
The cloud computing unit, whose customers are mostly businesses, has been attempting to lure in more customers with new tools, including a service called Amazon Bedrock that provides companies with access to AI models they can use to make their own applications. In April, Jassy said AWS was on pace for $100 billion in annual revenue.
But Amazon is also expected to spend more this year to support the unit. During a call with reporters, Chief Financial Officer Brian Olsavsky said the company spent more than $30 billion during the first half of the year on capital expenditures, the majority of it to boost infrastructure for AWS. It expects that to increase during the second half, he said.
Like other tech companies, Amazon has been ramping up investments in data centers, chips and the power needed for AI workloads, Olsavsky said. Among other projects, the company plans to put billions toward additional infrastructure in Saudi Arabia, Mexico and Mississippi, where it has secured state incentives to build two data center “complexes.”
“The key for us is always to make sure that we’re matching that supply and demand, and running it efficiently so we don’t have excess capacity,” Olsavsky said. “That’s not a concern right now. Our concern is more on getting the supply.”
Meanwhile, revenue for the company’s core e-commerce business grew by 5%, which was more sluggish compared to recent quarters. The numbers did not include sales from Amazon’s annual Prime Day discount event, which took place last month.
Olsavsky said the company came up short on revenue growth in North America because customers were still being cautious with their spending and trading down to cheaper items.
Amazon said sales from its advertising business — which mostly comes from ad listings on its online platform — jumped by 20%. Earlier this year, it began placing ads on movies and TV shows found on its Prime Video service to bring in extra dollars.
Last month, Prime Video also became one of three companies to sign an 11-year media rights deal with the National Basketball Association.
But the company faces other challenges.
This week, federal regulators said Amazon was responsible for the recall of more than 400,000 hazardous products that were sold on its platform by third-party sellers and shipped using its fulfillment service.
Amazon is also facing an antitrust lawsuit, which alleges it has been overcharging sellers and stifling competition.
While Shein is now headquartered in Singapore, it was originally founded by Chinese billionaire Sky Xu in Nanjing, China in 2008 and is still heavily reliant on Chinese suppliers. Upon news of Shein’s potential New York IPO, U.S. Senator Marco Rubio, a Republican from Florida, reached out to the SEC to urge it to block the listing unless the company was willing to cough up disclosures about forced labor in its supply chain, ties to the Chinese government and other ethics concerns.
“The amount of disclosure asked for was above and beyond, and would put a lot of pressure on any company, let alone foreign ones,” Christopher Mora, head of capital markets at Centri Business Consulting, told Observer.
Since then, Shein has hired Rubio’s former chief to lobby on the company’s behalf in a bid to soften its regulatory risks in the U.S. Shein insists it has “zero tolerance” for the use of forced labor in its supply chain and claims it requires all suppliers to source material from pre-approved origins. However, likely sensing a tough road ahead with U.S. regulators, the company now plans to file a confidential prospectus with the Financial Conduct Authority (FCA), the U.K.’s securities exchange regulator.
A London listing won’t solve Shein’s headaches
Rubio has already written to the U.K. chancellor, the British title for their finance minister, urging them to look deeper into Shein’s China ties. Many in the British business and regulatory community have expressed similar concerns.
Shein’s roots in the world’s second-largest economy is not the only reason for its scrutiny. To ship inventory to the U.S. and U.K., Shein takes advantage of a “de minimis” loophole, created to allow people to bring souvenirs or small-value items into the country without paying import tariffs. Unlike other major retailers, Shein (and Temu) notoriously ship clothes in countless small packages, each less than the threshold to which an import tariff would apply. This controversial approach allows it to skip heavy taxes that domestic retailers don’t get to avoid, making it hard for them to compete.
However, the U.K. may not have the luxury to complain. At a $64 billion valuation currently, Shein’s IPO would be larger than every London Stock Exchange listing since 2018, combined. This is even after Shein’s valuation was cut down from the $90 billion it was targeting when filing to go public in New York. The London Stock Exchange is a lot smaller than its New York counterpart. It has a total size of around $3 trillion, approximately the size of Microsoft, just one of the several trillion-dollar companies listed publicly in the U.S. Amidst ongoing elections, Shein has won the support of the U.K. Labour Party leaders, who are predicted by pollsters to come into power after the election.
Pepper, the e-commerce platform for food distributors, continues to edge into Sysco and US Foods territory by giving smaller, independent distributors a technology leg up.
The company developed an ordering system specifically for independent food distributors that supports catalogs of over 100,000 items and enables these companies to launch mobile apps and websites so that they can accept orders and payments online.
Co-founder and CEO Bowie Cheung, who previously worked at Uber Eats, said the company now has 200 customers among a market of 25,000 food distributors. However, Cheung said Pepper wants to grow that by facilitating the relationship between independent distribution and technology.
“These businesses, generally speaking, have never been well served by the big box broad line distributors like Sysco or US Foods,” Cheung told TechCrunch. “If you enjoy the diversity and the vibrancy that non-chain restaurants bring to your community, then you already understand the importance of that independent distributor, and that’s very much the customer that we have always served and continue to serve today.”
Pepper is doing this by developing dozens of new product features each year that leverage advanced technology, like generative AI, to improve the experience, efficiency and results. The company’s proof points include customers seeing a 23% increase in sales, 93% buyer retention, and the ability to save over 10 hours of work per week per sales representative, Cheung said.
There are some players in the e-commerce food distribution space with Pepper, including Choco, which developed a sustainable food system for restaurants and suppliers; Cut+Dry and Anchovi, which is Dot Foods’ white-label foodservice e-commerce platform.
Where Cheung believes Pepper is different is that all of those competitors took a marketplace-first strategy where you download an app. There is no “Pepper app,” but rather it takes a distributor-facing strategy, he said. This means that the distributor’s brand identity is front-and-center instead of Pepper’s.
Customers seem to like it. The over 140 customers is double the number of customers it had when Pepper raised $16 million Series A back in 2021.
Since then, the company became a full-stack payment processor. This makes it easier for operators to pay distributors. It also “reimagined” what the modern customer relationship management and copilot software should look like for a sales rep that works in food distribution so they can be more productive. In addition, the company built an ads platform that enables distributors to run marketing campaigns with their suppliers to promote existing products.
Cheung wasn’t specific on Pepper’s revenue, but did share that it has grown by over 20 times. He also didn’t disclose the company’s valuation, but did say it was “a step up from our last round.”
Investors like Pepper, too. On Monday, the company announced a $30M Series B round of funding led by new investor ICONIQ Growth and with participation from another new investor, Harmony Partners, and existing investors at Index Ventures, Greylock and Imaginary. This gives the company around $60 million in total funding.
“ICONIQ Growth is the perfect partner for us,” Cheung said. “Their track record in backing large, successful vertical software businesses and industries that the consumer world wouldn’t necessarily consider really resonated with us. Food distribution is one of those industries.”
Have a juicy tip or lead about happenings in the venture world? Send tips to Christine Hall at chall.techcrunch@gmail.com or via this Signal link. Anonymity requests will be respected.
E-commerce giant Shein is spreading its arms to envelope more than just the fashion and apparel for which it’s known—and it’s starting to look like another familiar online market platform in the process.
Shein is wooing brands such as household goods conglomerate Colgate-Palmolive, toy maker Hasbro, and skincare brands to sell their products in its marketplace, Reuters reported Tuesday. The company, known for affordable and stylish clothes—albeit made with concerns about labor practices and its environmental impact—is taking steps to create a platform that is everything to everyone.
“Everybody associates Shein with fashion, but we are doing all verticals,” Christina Fontana, Shein’s senior director of brand operations for Europe, Middle East and Africa, said at a Paris conference on April 17, according to Reuters.
“Our consumers want brands, [so] if that’s what they’re looking for, that’s what we’re going to give them,” she added.
Shein’s outward expansion is a clear tactic to take a bigger piece of the e-commerce pie, Steve Tadelis, economic analysis and policy professor at the University of California at Berkeley, told Fortune.
Shein has the largest fast-fashion market share in the U.S, and its annual profit doubled to $2 billion in 2023 from the year before. It’s eyeing an IPO and a whopping $90 billion valuation. While the size of its retail empire still pales in comparison to Amazon’s stranglehold on 38% of the U.S. e-commerce market, Tadelis said Shein will want to go after the industry leader.
“It shouldn’t be surprising that with all of the regulators around the world and talking about the Amazon monopoly that needs to be reined in, well, Shein is now taking a bite out of their apple and will probably take more of those bites,” he said.
Shein’s big wins
Shein, a China-based fast-fashion platform founded by billionaire Sky Xu in 2008, has skyrocketed to success and 45 million monthly users through its massive and efficient production and distribution strategies.
Using AI and electronic monitoring, Shein is able to identify online trends, turn to its suppliers to manufacture small batches of products, then take initial sales data to decide to mass produce a product. The system nearly guarantees the company has its finger on the pulse of trends and can deliver goods fast, though it’s gotten into hot water over allegations of copyright infringement and data scraping, as well as the proliferation of counterfeit product listings.
Even as regulatory bodies, like the European Union’s European Commission, have tried to put checks and balances on the company to stymie its questionable business practices, Shein may have found a way around that.
John Deighton, professor emeritus at the Harvard Business School, told Fortune that Shein’s strategy of incorporating more brand names onto its platform will only help the company dodge increased attention: The site could soon be flooded with thousands of listings from familiar and trusted products, such as Colgate toothpaste and Play-Doh, essentially telling regulatory bodies there’s nothing to see here.
“They won’t get caught up by the scrutiny,” Deighton said.
Butting heads with Amazon
Shein’s behind-the-scenes methodology makes expanding beyond fashion a natural next step, Tadelis argued. With an efficient infrastructure in place, Shein is able to be more nimble in expanding outward from apparel.
“I really think this is a smart business decision of saying, ‘We have an amazing logistics network, let’s start expanding it into other areas where we could procure cheap products,’” he added.
Rui Ma, tech analyst and COO of market research platform AlphaWatch.AI, told Fortune that Shein’s secure spot in apparel offers another advantage in its race to beat Amazon. Fashion is a notoriously finicky sector,and Amazon, despite dipping its toe into the world of apparel, hasn’t been able to see the same success as Shein, Ma said.
“It’s been very—historically—very difficult to match up demand supply,” she said. “It’s not been a particularly easy category.”
But as Shein takes pages out of Amazon’s playbook, Amazon is simultaneously doing the same to Shein. Amazon announced last December it would slash seller fees from 17% to 5% for apparel under $15, with apparel between $15 to $20 triggering a 10% fee, starting in January. The company said on Monday its packages are getting delivered faster than ever: 60% of orders placed in 60 major U.S. cities arrived the same day or day after the order was placed. According to the company, that’s part of its longstanding efforts to stay on top of the e-commerce market and tend to customer needs. Shein customers may have to wait 14 days for their orders to arrive.
Tadelis believes this is par for the course. Just as in most markets, company philosophies start to converge on each other when one finds an effective formula.
“There’s no surprise that these things are looking more alike,” he said. “Because once there’s a good, winning strategy … then you’re going to see imitators.”
For the consumer, there will certainly appear to be copycatting and similarities in promotions and perks across e-commerce platforms. But Ma said, don’t be fooled by Shein’s bid to mime its competitors. The site might start to look a lot like Amazon in its offerings, but behind the scenes, it’s very much sticking with its unique logistics network.
“It might feel the same to us as consumers. It’s going to become more of an everything store,” she told Fortune. “But how it builds that experience, I think the logic is very different from Amazon.”
GENEVA — Since late last century and the early days of the web, providers of digital media like Netflix and Spotify have had a free pass when it comes to international taxes on films, video games and music that are shipped across borders through the internet.
But now, a global consensus on the issue may be starting to crack.
As the World Trade Organization opens its latest biannual meeting of government ministers Monday, its longtime moratorium on duties on e-commerce products — which has been renewed almost automatically since 1998 — is coming under pressure as never before.
This week in Abu Dhabi, the WTO’s 164 member countries will take up a number of key issues: Subsidies that encourage overfishing. Reforms to make agricultural markets fairer and more eco-friendly. And efforts to revive the Geneva-based trade body’s system of resolving disputes among countries.
All of those are tall orders, but the moratorium on e-commerce duties is perhaps the matter most in play. It centers on “electronic transmissions” — music, movies, video games and the like — more than on physical goods. But the rulebook isn’t clear on the entire array of products affected.
“This is so important to millions of businesses, especially small- and medium-sized businesses,” WTO Director-General Ngozi Okonjo-Iweala said. “Some members believe that this should be extended and made permanent. Others believe … there are reasons why it should not.”
“That’s why there’s been a debate and hopefully — because it touches on lives of many people — we hope that ministers would be able to make the appropriate decision,” she told reporters recently.
Under WTO’s rules, major decisions require consensus. The e-commerce moratorium can’t just sail through automatically. Countries must actively vote in favor for the extension to take effect.
Four proposals are on the table: Two would extend the suspension of duties. Two — separately presented by South Africa and India, two countries that have been pushing their interests hard at the WTO — would not.
Proponents say the moratorium benefits consumers by helping keep costs down and promotes the wider rollout of digital services in countries both rich and poor.
Critics say it deprives debt-burdened governments in developing countries of tax revenue, though there’s debate over just how much state coffers would stand to gain.
The WTO itself says that on average, the potential loss would be less than one-third of 1% of total government revenue.
The stakes are high. A WTO report published in December said the value of “digitally delivered services” exports grew by more than 8% from 2005 to 2022 — higher than goods exports (5.6%) and other-services exports (4.2%).
Growth has been uneven, though. Most developing countries don’t have digital networks as extensive as those in the rich world. Those countries see less need to extend the moratorium — and might reap needed tax revenue if it ends.
South Africa’s proposal, which seeks to end the moratorium, calls for the creation of a fund to receive voluntary contributions to bridge the “digital divide.” It also wants to require “leading platforms” to boost the promotion of “historically disadvantaged” small- and medium-sized enterprises.
Industry, at least in the United States, is pushing hard to extend the moratorium. In a Feb. 13 letter to Biden administration officials, nearly two dozen industry groups, including the Motion Picture Association, the U.S. Chamber of Commerce and the Entertainment Software Association — a video-game industry group — urged the United States to give its “full support” to a renewal.
“Accepting anything short of a multilateral extension of the moratorium that applies to all WTO members would open the door to the introduction of new customs duties and related cross-border restrictions that would hurt U.S. workers in industries across the entire economy,” the letter said.
A collapse would deal a “major blow to the credibility and durability” of the WTO and would mark the first time that its members “changed the rules to make it substantially harder to conduct trade,” wrote the groups, which said their members include companies that combined employ over 100 million workers.
GENEVA — Since late last century and the early days of the web, providers of digital media like Netflix and Spotify have had a free pass when it comes to international taxes on films, video games and music that are shipped across borders through the internet.
But now, a global consensus on the issue may be starting to crack.
As the World Trade Organization opens its latest biannual meeting of government ministers Monday, its longtime moratorium on duties on e-commerce products — which has been renewed almost automatically since 1998 — is coming under pressure as never before.
This week in Abu Dhabi, the WTO’s 164 member countries will take up a number of key issues: Subsidies that encourage overfishing. Reforms to make agricultural markets fairer and more eco-friendly. And efforts to revive the Geneva-based trade body’s system of resolving disputes among countries.
All of those are tall orders, but the moratorium on e-commerce duties is perhaps the matter most in play. It centers on “electronic transmissions” — music, movies, video games and the like — more than on physical goods. But the rulebook isn’t clear on the entire array of products affected.
“This is so important to millions of businesses, especially small- and medium-sized businesses,” WTO Director-General Ngozi Okonjo-Iweala said. “Some members believe that this should be extended and made permanent. Others believe … there are reasons why it should not.”
“That’s why there’s been a debate and hopefully — because it touches on lives of many people — we hope that ministers would be able to make the appropriate decision,” she told reporters recently.
Under WTO’s rules, major decisions require consensus. The e-commerce moratorium can’t just sail through automatically. Countries must actively vote in favor for the extension to take effect.
Four proposals are on the table: Two would extend the suspension of duties. Two — separately presented by South Africa and India, two countries that have been pushing their interests hard at the WTO — would not.
Proponents say the moratorium benefits consumers by helping keep costs down and promotes the wider rollout of digital services in countries both rich and poor.
Critics say it deprives debt-burdened governments in developing countries of tax revenue, though there’s debate over just how much state coffers would stand to gain.
The WTO itself says that on average, the potential loss would be less than one-third of 1% of total government revenue.
The stakes are high. A WTO report published in December said the value of “digitally delivered services” exports grew by more than 8% from 2005 to 2022 — higher than goods exports (5.6%) and other-services exports (4.2%).
Growth has been uneven, though. Most developing countries don’t have digital networks as extensive as those in the rich world. Those countries see less need to extend the moratorium — and might reap needed tax revenue if it ends.
South Africa’s proposal, which seeks to end the moratorium, calls for the creation of a fund to receive voluntary contributions to bridge the “digital divide.” It also wants to require “leading platforms” to boost the promotion of “historically disadvantaged” small- and medium-sized enterprises.
Industry, at least in the United States, is pushing hard to extend the moratorium. In a Feb. 13 letter to Biden administration officials, nearly two dozen industry groups, including the Motion Picture Association, the U.S. Chamber of Commerce and the Entertainment Software Association — a video-game industry group — urged the United States to give its “full support” to a renewal.
“Accepting anything short of a multilateral extension of the moratorium that applies to all WTO members would open the door to the introduction of new customs duties and related cross-border restrictions that would hurt U.S. workers in industries across the entire economy,” the letter said.
A collapse would deal a “major blow to the credibility and durability” of the WTO and would mark the first time that its members “changed the rules to make it substantially harder to conduct trade,” wrote the groups, which said their members include companies that combined employ over 100 million workers.
A once-bustling group of companies, backed by billions in venture capital funding, saw a record year for IPOs in 2021. Now, three years later, most of those direct-to-consumer, or DTC, companies still struggle with profitability.
“It’s that profitability angle now that demarcates the winners in DTC from the losers,” said GlobalData Retail’s managing director, Neil Saunders. “One of the problems with a lot of direct-to-consumer companies is they’re not profitable and a number of them don’t really have a convincing pathway to profitability. And that’s when investors get very nervous, especially in the current market where capital is expensive.”
Allbirds, Warby Parker, Rent the Runway, ThredUp and others once represented a new era of retail. These digital-first, ultra-modern companies rose to prominence in the 2010s, boosted by the rising tide of social media ads and online shopping. With the cohort came a huge wave of venture capital funding, propped up by low interest rates.
In just under a decade, venture capital funding exploded, from $60 billion in 2012 to an eye-watering $643 billion in 2021. Thirty percent of that funding was funneled into retail brands, and more than $5 billion went specifically to companies that intersected e-commerce and consumer products. As the Covid-19 pandemic moved most shopping online, venture capital funds were all-in on digital native direct-to-consumer companies.
According to a CNBC analysis of 22 publicly traded DTC companies, more than half have seen a decline of 50% or more in their stock price since they went public. Notable companies in the space, such as SmileDirectClub, which went public in 2019, and Winc, a wine subscription box, have declared bankruptcy. Casper, a direct-to-consumer mattress company, announced it was going private in late 2021 after a lackluster year-and-a-half of trading. Most recently meal kit subscription service Blue Apron exited the U.S. stock market after being acquired by Wonder Group.
Now many of these so-called DTC darlings are being forced to reevaluate their business model to survive a shifting consumer landscape.
Watch the video above to find out what happened to the DTC darlings of the 2010s and how the direct-to-consumer cohort is pivoting in the new decade.
Etsy Inc., once known as a quirky marketplace for handmade, artisanal and vintage items, seems to be moving further away from its origins amid a much tougher e-commerce landscape and the impact of AI.
Etsy ETSY, +4.83%
will be marketing to a whole new audience on Sunday, when its first Super Bowl commercial will run. The 30-second ad is quirky; it depicts a generic 19th-century American leader who’s flummoxed over how to reciprocate France’s gift of the Statue of Liberty. With the help of an anachronistic smartphone, he and his team search on Etsy using its new Gift Mode option, and find its “Cheese Lover” category after determining that the French love cheese. Voilà — they decide to send the French some cheese.
The commercial is part of Etsy’s push of a new user interface featuring Gift Mode, which lets shoppers search for gifts for a specific type of person or occasion — combining generative AI and human curation to give gift buyers some unusual options.
But are these moves desperate and costly efforts to try to reach potential new buyers, coming on the heels of Etsy’s plans to lay off 11% of its staff?Or could running a TV ad at the most expensive time of the year actually lead to more sales on the once-fast growing marketplace?
Etsy believes these moves will help the company grow again, and its research shows the average American spends $1,600 a year on gifts. “There is no single market leader and Etsy sees a real opportunity to become the destination for gifting,” Etsy’s Chief Executive Josh Silverman said in a recent blog post.
Etsy is clearly under pressure after seeing its gross merchandise sales more than double in 2020 during the pandemic, when it became a go-to place to buy handmade masks and all kinds of items for the home, from vintage pieces to antiques to castoffs. From personal experience as an Etsy seller, I saw sales at my own small vintage-clothing shop more than double in 2020 and then fall back in 2021, while still remaining higher than in 2019. In the last two years, sales have slowed, and some other sellers have witnessed similar patterns, based on their comments in seller forums.
The number of sellers and buyers on the platform has increased on the same level as gross merchandise sales. But e-commerce competition has also gotten more fierce.
“Our main concern with Etsy is growing competition in the space from new players like Temu,” said Bernstein Research analyst Nikhil Devnani, in an email. Temu and fellow Chinese online retailer Shein have raised a lot of investor jitters, as Etsy’s gross merchandise sales have slipped over the last year and are forecast to fall again in its upcoming fourth-quarter earnings report later this month.
Devnani said a Super Bowl ad could potentially help the marketplace gain visibility, something it has always lacked.
“One dynamic they’ve talked about a lot is that brand awareness/recollection is still low, and this keeps frequency low,” he said, noting that Etsy buyers shop on the site about three times per year, on average. “They want to be more top-of-mind … Super Bowl ads are notoriously expensive of course, but can be impactful/get noticed.”
The company’s big focus on Gift Mode, however, could be a risky strategy. How many times a year do consumers look for gifts? And in a note Devnani wrote in October, before the company’s Gift Mode launch, he said that one of the concerns investors have is that Etsy is too niche. “’How often does someone need something special?’ is the rhetoric we hear most often,” he said. Etsy, then, is counting on buyers returning for other items for themselves.
Etsy CEO Silverman believes buyers will come back again and again to purchase gifts. Naved Khan, a B. Riley Securities analyst, said in a recent note to clients that he believes Gift Mode plays to Etsy’s core strengths, offering “unique goods at reasonable prices” versus the mass-produced products sold on Shein, Temu, Amazon.com Inc. AMZN, +2.71%,
and other sites.
Consumer spending has changed, though. At an investor conference in December, Silverman said that consumers are spending on dining out and traveling, instead of buying things.
But while investors still view Etsy as a niche e-commerce site, some buyers and sellers see it overrun with repetitive, non-relevant ads. Complaints about a decline in search capabilities, reliance on email and chat for support, and constant tech changes are common on seller forums and Facebook groups. AI-generated art offered by newer sellers as a side hustle has also become a thought-provoking, debated issue. And there are complaints about mass-produced items making their way on the site.
Etsy said that in addition to its human and automated efforts, it also relies on community flags to help take down infringing products that are not allowed on its marketplace, and that community members should contact the company when if they see mass-produced items for sale on the site.
It also continues to work on search. On its last earnings call, Silverman said the company was moving beyond relevance to the next frontier of search, one “focused on better identifying the quality of each Etsy listing utilizing humans and [machine-learning] technology, so that from a highly relevant result set we bring the very best of Etsy to the top — personalized to what we understand of your tastes and preferences.”
The pressure could build on the company if its latest moves don’t generate growth. Etsy recently gave a seat on its board to a partner at activist investor Elliott Management, which bought a “sizable” stake in the company in the last few months. Marc Steinberg, who is responsible for public and private investments at Elliott, has also has been on the board at Pinterest PINS, -9.45%
since December 2022.
Elliott Management did not respond to questions. But in a statement last week, Steinberg said he was joining the board because he “believe[s] there is an opportunity for significant value creation.” Some sellers fear that the pressure from investors and Wall Street will lead to Etsy allowing mass-produced products onto the site. In its fall update, Etsy said the number of listings it removed for violating its handmade policy jumped 112% and that it was further accelerating such actions.
Etsy’s stock before the news of Elliott’s stake was down about 18% this year. Its shares are now off about 3.65% this year, after recently having their best day in seven years on the news that Steinberg joined the board.
Etsy is a unique marketplace that for many years had a much better reputation than some of its rivals, like eBay EBAY, +0.98%.
But since going public and answering to Wall Street, the need to provide growth and profits for investors has become much more of a driver. The Super Bowl ad and Gift Mode may bring a broader awareness to Etsy, but will it be the right kind of awareness? Sellers like me hope these new efforts will stave off the continuing fight with the likes of Temu and other vendors of mass-produced products, and help Etsy retain the remaining unique aspects of its marketplace.
Amazon.com Inc. shares continued their charge higher Friday, securing their highest close in more than two years.
The e-commerce giant’s stock advanced 2.7% in Friday’s session to finish the day at $174.45. That was the best ending level since Dec. 9, 2021, when Amazon’s stock AMZN, +2.71%
closed at $147.17, according to Dow Jones Market Data.
GOOGL, +2.12%
as the third most valuable U.S. company by market capitalization last week, though it’s since fallen back to the No. 4 spot. Still, the recent momentum for Amazon shares has been enough to help the company hold down a place in the top four even as Nvidia Corp. NVDA, +3.58%
nips at its heels.
Alphabet finished Friday’s session with a $1.86 trillion market cap, while Amazon’s was $1.81 trillion and Nvidia’s was $1.78 trillion.
Wall Street had a mixed reaction to earnings from big technology companies this quarter, but Amazon’s results were among those that were well received.
“Overall the overhangs which kept a lid on AMZN shares — e-commerce deceleration in 2021, e-commerce deceleration and margin compression in 2022 and AWS deceleration in 2023 — will have dissipated throughout 2024,” UBS analyst Stephen Ju wrote in a note to clients following those results.
The company has been a huge driver of earnings growth for the S&P 500 consumer discretionary sector, as its quarterly earnings per share grew to $1 in the latest quarter from 3 cents a year before. The consumer discretionary sector is now expected to post 33% growth in EPS for the fourth quarter, according to FactSet, but without Amazon, that would swing to a decline of about 1%.
Alibaba is operating in Suqian City, Jiangsu Province, China, on December 29, 2023.
Costfoto | Nurphoto | Getty Images
Shares of Alibaba initially whipsawed in premarket trade on Wednesday, as the company missed market expectations for revenue in the December quarter, but announced it is increasing the size of its share buyback program by $25 billion.
U.S.-listed shares in the Chinese e-commerce giant were are one point more than 5% higher in pre-market trade, veering between positive and negative territory.
Alibaba said the $25 billion increase is added to its share repurchase program through the end of March 2027, bringing the total available under the scheme to $35.3 billion.
The company said in a statement that the increased buyback shows the “confidence in the outlook of our business and cash flow.”
The announcement comes after a tumultuous year for Alibaba in 2023, when the company carried out its largest-ever corporate structure overhaul. It also separately implemented several high-profile management changes, with company veteran Eddie Wu taking over the reins as chief executive in September.
Alibaba on Wednesday released financial results for its December quarter.
Here’s how Alibaba did in its fiscal third quarter, compared to LSEG estimates:
Revenue: 260.35 billion Chinese yuan ($36.6 billion) versus 262.07 billion yuan expected.
Revenue missed expectations, growing just 5% year-over-year, logging a slowdown from the previous quarters as growth in the company’s China e-commerce business and cloud computing division remained slow.
Meanwhile, Alibaba’s net income in the December quarter fell 69% year-on-year to 14.4 billon Chinese yuan. The company said this was “primarily attributable to mark-to-market changes” to its equity investments and to a decrease in income from operations due to impairments related to its video streaming service Youku and supermarket chain Sun Art.
Alibaba has been grappling with a difficult macroeconomic environment in China, where the consumer has remained weak, even after Beijing removed its Covid-era restrictions. Amid economic uncertainties, local shoppers have flocked to discounting platforms such as Alibaba rival Pinduoduo.
The Taobao and Tmall business, Alibaba’s China e-commerce platforms, brought in revenue of 129.1 billion Chinese yuan in the December quarter, up just 2% year-on-year.
In a statement, recently-appointed Alibaba CEO Eddie Wu said the company’s focus is on growth in e-commerce and cloud.
“Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing. We will step up investment to improve users’ core experiences to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year.”
Earnings before interest, taxes, and amortization (EBITA), a measure of profitability, rose 1% at the Taobao and Tmall business for the fiscal third quarter.
For the cloud computing business, EBITA rose 86% year-on-year as Alibaba focuses on profitability.
One bright spot in Alibaba’s numbers was the international commerce business, which includes platforms like AliExpress and Lazada, which posted revenue of 28.5 billion yuan, up 44% year-on-year.
GOOGL, +0.86%
and become the third-largest U.S. public company upon Friday’s close, after its results were well received by Wall Street and Alphabet’s earlier in the week got panned.
Amazon edged out Alphabet only barely, with a closing market cap of $1.785 trillion compared with $1.777 trillion for Alphabet, according to Dow Jones Market Data.
The e-commerce giant hadn’t been valued above the Google parent company since Sept. 30, 2022, according to Dow Jones Market Data. That was also the last time Amazon was the third-largest by market cap.
Wall Street found plenty to like in Amazon’s latest report, including drastic improvement in operating income, upbeat commentary on the cloud and momentum within the retail business. Meanwhile, Alphabet’s earnings were met with a chillier reception as the company talked up heavy spending plans linked to its artificial-intelligence ambitions.
The very top of the market-cap ranks has changed up as well lately, though admittedly with less of a tie to earnings. Microsoft Corp.’s MSFT, +1.84%
closing valuation surpassed Apple Inc.’s AAPL, -0.54%
on Jan. 12 for the first time since November 2021. While the two traded around the top spot in January, Microsoft has been sitting there since Jan. 25.
Investors bought up shares of Etsy Inc. on Thursday after the online crafts marketplace added to its board of directors a partner of hedge fund Elliott Investment Management L.P., which recently acquired a “sizable” stake in the company.
Etsy ETSY, +9.31%
said Marc Steinberg, who is responsible for public- and private-equity investments at Elliott, has been appointed to the board, effective Feb. 5, and will also join the board’s audit committee.
“Etsy has a highly differentiated position in the e-commerce landscape and a uniquely attractive business model, supported by a distinctive and engaged community,” Steinberg said. “We became a sizable investor in Etsy and I am joining its board because I believe there is an opportunity for significant value creation.”
Etsy’s stock shot up 8% in afternoon trading, to pare earlier gains of as much as 14.2%. The stock was headed for its best one-day gain since it climbed 9.2% on July 11.
Elliott’s stake was acquired in recent months, as the fund’s disclosure of equity holdings through the third quarter did not list Etsy shares.
“Marc’s appointment reflects our ongoing commitment to enhance the perspectives and expertise on the Etsy Board,” said Etsy Chairman Fred Wilson. “We look forward to benefiting from his voice in the boardroom as a seasoned and experienced investor as we continue our journey of creating a leading global e-commerce platform.”
Etsy’s stock has run up 18.6% over the past three months, but has tumbled 48.5% over the past 12 months. That’s compared with the S&P 500 index’s SPX
18.7% rally over the past year.
At an investor conference in December, Chief Executive Josh Silverman said business has slowed since the post-pandemic boom, as people have “had enough of buying things” and are now spending primarily on eating out and travel. Inflation and the loss of government subsidies was also weighing on spending.
Still, Silverman said, Etsy is now about two and a half times bigger than it was before the pandemic, and the company has more active buyers than it did at the peak of the pandemic.
Walmart Inc. will shut down Store No. 8, the big-box retailer’s startup incubator and innovation hub, the Wall Street Journal reported on Friday. It’s the latest move by a retailer to trim expenses and protect profits as shoppers continue to grapple with higher prices.
Chief Financial Officer John Rainey told employees in a memo that much of what Store No. 8 did had already been incorporated into the company’s operations as a whole, the Journal said.
“We’ve graduated capabilities from this operating approach that are now fully embedded in our organization,” Rainey said in the memo, according to the Journal.
“The responsibility to shape the future of retail is now shared by all segments,” he continued.
Walmart launched Store No. 8 in 2017 in an effort to experiment with new ideas, including augmented reality, artificial intelligence and new ways of delivering products, and to stay nimble in a retail landscape increasingly defined by online shopping. The Journal said that Scott Eckert, who led Store No. 8, was leaving the company.
Walmart did not immediately respond to a request for comment. Shares were up fractionally after hours, after finishing 0.5% lower during the day.
Walmart and other retailers have signaled that they are rethinking what technology to invest in and what stores to keep open. Those decisions would follow years of online-sales adoption, pandemic-related disruptions to shopping and a jump in prices for basics that began in 2022 and led people to shy away from buying things like laptops and clothing.
The Wall Street Journal, which first reported that news, said Macy’s intended to bring more automation to its supply chain and invest “in areas that impact consumers,” like visual displays in stores and efforts to smooth out the online-shopping experience.
Discount retailer Pepco Group said conflict in the Red Sea has had a limited effect on current product availability, but could hurt supply in the coming months if it continues.
The discount retailer–which houses Poundland in the U.K. and Dealz and Pepco in continental Europe–said Thursday that attacks on vessels in the Red Sea by Houthi fighters was leading to higher spot freight rates and delays to container lead times.
Although Pepco’s freight costs are contracted until the end of its third quarter, it faces additional surcharges from carriers stemming from the longer routes being taken by shipping companies avoiding the Red Sea.
Meanwhile, the company said that for its fiscal first quarter ended Dec. 31, group like-for-like revenue fell 2.3% although there was an improving trend during the period.
Revenue grew on a constant currency basis grew 11% from a year earlier to 1.9 billion euros ($2.07 billion), with the Pepcobusiness’s like-for-like revenue falling 3.7% against a tough comparative period when sales were up by 20% from the year-prior period.
Revenue at Dealz fell 4.6%, driven by planned lower stock availability in general merchandise categories. Poundland’s performance continued to be robust with a strong Christmas performance driven by demand for fast-moving consumer goods, the company said.
Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com
In a keynote address at the Consumer Electronics Show in Las Vegas, Walmart president and CEO Doug McMillon is offering a glimpse as to how the retail giant was putting new technologies, including augmented reality (AR), drones, generative AI, and other artificial intelligence tech to work in order improve the shopping experience for customers.
At the trade show, the company revealed a handful of new products, including two AI-powered tools for managing product search and replenishment, as well as a new beta AR social commerce platform called “Shop with Friends.” It also highlighted how it was using AI in other areas of its business, including within Sam’s Club and in apps used by store associates.
Most notably, Walmart is launching a new generative AI search feature on iOS that will allow customers to search for products by use cases, instead of by product or brand names. For example, you could ask Walmart to return search results for things needed for a “football watch party,” instead of specifically typing in searches for chips, wings, drinks, or a 90-inch TV. These enhanced search results will span categories, rivaling Google’s SGE (Search Generative Experience), which can recommend products and show various factors to consider, along with reviews, prices, images, and more.
Image Credits: Walmart
Ahead of CES, the company had demonstrated an AI shopping assistant that would let customers interact with a chatbot as they shopped, to ask questions and receive personalized product suggestions, as well. At the time, Walmart teased that a generative AI-powered search feature was also in the works. It suggested customers could ask for things like a “unicorn-themed birthday party” and get results like unicorn-themed napkins, balloons, streamers, and more. Now the feature is rolling out on mobile devices, iOS first.
Another potentially promising use of AI involves the replenishment of frequently ordered items.
Walmart will initially test this use case with Walmart InHome Replenishment, which will use AI and its existing replenishment expertise combined to create online shopping carts for customers with items they regularly order. Because it’s only available through the InHome program, these items are then delivered to a customer’s fridge in their kitchen or garage using the smart lock-powered InHome delivery service.
Image Credits: Walmart
However, if the feature works well, it’s not hard to imagine how it could be put to use to offer replenishment of other household items as well, similar to Amazon’s Subscribe-and-Save.
Another new Walmart product making a debut at CES is “Shop with Friends,” an AR shopping tool that lets customers share virtual outfits they create with their friends and then get feedback on their finds.
Image Credits: Walmart
CEO Doug McMillon referred to the suite of new products as something he called “adaptive retail” — that is, retail experiences that are personalized and flexible.
“While omnichannel retail has been around for decades, this new type of retail – adaptive retail – takes it a step further, said Suresh Kumar, global chief technology officer, and chief development officer, Walmart Inc., in a statement shared ahead of the CES keynote. “It’s retail that is not only e-commerce or in-store, but a single, unified retail experience that seamlessly blends the best aspects of all channels. And for Walmart, adaptive retail is rooted in a clear focus on people,” he said.
The company touched on other ways it’s employing AI, as well. Walmart’s Sam’s Club will introduce an AI and computer vision-powered technology that helps solve the problem of waiting in line for receipt verification when exiting the store. The pilot, currently running in 10 locations, will confirm members have paid for their items without requiring a store associate to check their charts. Instead, computer vision tech will capture images of customers’ carts and AI will speed the process of matching cart items to sales. Walmart expects to bring the tech to its nearly 600 clubs by year-end.
In another area, Walmart’s generative AI tool for store associates, My Assistant, will be expanded to 11 countries outside the U.S. in 2024, where it will work in employees’ native languages. Already, the tool has become available in Canada, Mexico, Chile, Costa Rica, El Salvador, Honduras, Guatemala, and Nicaragua and is on track for launches in India and South Africa. My Assistant helps employees with writing, summarizing large documents, and offering “thought starters” to spark creativity, Walmart says.
Image Credits: Walmart
On the matter of AI, McMillon stressed that the company wouldn’t prioritize the technology without considering the potential implications. Instead, Walmart’s “underlying principle is that we should use technology to serve people and not the other way around,” he said.
Still, he admitted that AI will mean some jobs will be eliminated.
” No doubt some tasks will go away and some roles will change. And some of them should, like the ones that involve lifting heavy weights or doing repetitive tasks,” the exec explained. “As that’s happening, we’re designing new roles that our associates tell us are more enjoyable and satisfying, and also often result in higher pay. So we’re investing to help our associates transition to this shared future,” McMillon added.
Outside of AI, Walmart is looking to other new technology for faster deliveries. The company announced it’s expanding its drone delivery service in the Dallas-Ft. Worth metro to 1.8 million households, or 75% of the metroplex area. The deliveries, which take place in 30 minutes or less, are powered by Wing and Zipline. Walmart also notes that 75% of the 120,000 items in a Walmart Supercenter meet the size and weight requirements for drone delivery. To date, Walmart has done over 20,000 drone deliveries in its two-year trial.
