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Afterpay and Lovisa crack a nod from fundies

The AFR reported on the view of Monash Investors' co-founder regarding AfterPay and Lovisa. Speaking about the former, the fund manager believes it still has significant growth potential because it has won over retailers. Consequently, the fund trades Afterpay a lot, because it's a volatile stock "and it gets a bit crazy at times". The fund also plays downs the current Senate inquiry into payday lending, noting that expecting the inquiry to reveal that improper conduct mainly comes from the "vulture funds". Fast-fashion jewellery retailer Lovisa also gets a mention in the article, with the fund being particularly excited about their bricks and mortar outlets, "the return they get on their new stores is just fabulous." For $250,000, Lovisa can have open a new outlet in Australia, and that investment will pay for itself within 12 months. Lovisa's share price peaked in June at $12.53, but closed at $7.36 on Friday.

Research shows chatbots are a pain in the proverbial

The Drum reported that new research reveals a rise in consumer dissatisfaction with the increasing reliance placed by brands on automated chatbots, with one in five urging firms to abandon the practice in favour of real-time messaging with actual staff. The research found that 45% of respondents described their own experience of chatbots as ‘annoying’ while no less than 78% dismissed the technology as too impersonal. Widespread dissatisfaction with the service provided by chatbots has done nothing to dent the enthusiasm of marketers, with 80% of CMOs either already using the technology or planning to do so by 2020 according to a separate Oracle survey. Yet another technology that looks attractive on the surface, but it is actually shallow and, in the end, annoying for the consumers.

Solid sales growth in the US

Reuters reported that the US sales keep growing unabated and the economy is strong.  Consumer spending gathered momentum in November as households bought furniture, electronics and a range of other goods, which could further allay fears of a significant slowdown in the American economy even as the outlook outside of the US continues to darken.  As usual, Reuters quoted irrelevant statistics (0.9% increase in November in comparison to October).  The relevant number was 4.2%, which was the increase in November 2018 against November 2017; quite a massive number.   According to Reuters,  the recent sharp sell-off on Wall Street and partial inversion of the U.S. Treasury yield curve had stoked fears of a recession, but worries over the economy’s health were eased on Thursday after government data showed the number of Americans seeking unemployment benefits fell back to a near 49-year low last week.

How to get Amazon to your neighbourhood

The AFR reported on the lengths New York went to in order to coax Amazon into opening one of its two new headquarters in the city. Overall, 200 US cities put in initial bids for the HQ privilege and the 20 that made the shortlist went to extraordinary efforts to try secure Amazon's presence. In its first proposal, New York offered to use eminent domain to help Amazon get the necessary land. Amazon ended up selecting Long Island City and there are no plans to use eminent domain. New York's second response included dozens of pages of detailed information on outcomes from the city's educational institutions. Amazon had asked for detailed information on the availability of machine-learning specialists, user-experience designers and hardware engineers - three jobs critical to its growth. The e-commerce giant will open its second new HQ in Arlington, Virginia.

L Brands to sell La Senza lingerie brand

Reuters reported that L Brands, Victoria's Secret owner, said it would sell its luxury lingerie brand La Senza to an affiliate of private equity firm Regent LP, capping a month's long effort to sell the loss-making business. The company has been facing stiff competition from American Eagle Outfitter’s Aerie and upstarts such as Adore Me and Third Love, forcing it to sell its non-core assets and focus on brands such as Victoria’s Secret and Bath & Body Works. L Brands monopoly has all but disappeared amid the rise of new direct-to-consumer underwear brands, with its share price tumbling around 48% this year.

UK regulator delays first word on Sainsbury's-Asda deal

Reuters reported that Britain’s competition regulator has delayed plans to publish its initial view on a probe into Sainsbury’s proposed 7.3 billion pound takeover of rival Asda. The Competition and Markets Authority (CMA) said on Thursday it would notify provisional findings and consider possible remedies in “January/early February”, ahead of the publication of its final report in “early March”. The CMA had previously said its initial report would be issued in “early January”. Sainsbury’s Chief Executive had already said last month that the firm would challenge in the courts any unfavorable final ruling by the CMA on the deal if it believed it was not backed up by published evidence.

Amazon ‘R’ Us?

The Hustle reported that Amazon has started producing its own toys under its AmazonBasics private label, stepping into the giant hole Toys ‘R’ Us left in the US toy market. Private-labeling, Amazon’s next step on its march to ultimate e-commerce efficiency, sent shivers down the spines of toymakers from Mattel to the North Pole. But what would a future without toy stores look like? We all know how the story starts: Amazon targets an industry, undercuts existing sellers until they fold, and adds the leftovers into its marketplace (RIP Borders, Tower Records, Circuit City, Sears...). After the news of Amazon’s plans surfaced, Mattel shares dropped more than 3% and Hasbro shares dropped more than 1%.

The Dollar General story

The Hustle reported that Dollar General became the fastest growing retailer in the US by catering to low-income consumers with no other options. Now, Dollar General and Dollar Tree are expected to have 50k stores in the next few years - roughly 10x as many as Walmart. But, dollar stores can be a discounted devil in disguise: Dollar store “deals” are often more expensive than bulk-bought alternatives due to deceptive packaging, and they often leave consumers with fewer options by driving local stores out of business. Box stores like Walmart cost millions to open, but Dollar General can open a store the size of a basketball court for US$250k, and turn a profit even in low-income communities with just 1,000 homes. And, the formula works astonishingly well, Dollar General has posted 28 straight years of same-store sales growth by serving as the lucrative last resort to America’s “permanent underclass.”

Uber's new advertising system

TechCrunch reported that Uber revealed plans to build a new advertising system into its UberEats platform. The revamped food delivery service will now allow restaurants to strategically boost sales of their Eats - for a price. Uber confidentially filed for an IPO last week, and this new ad-based product launch promises investors a tasty new revenue stream. Uber will first offer restaurants rankings boosts in exchange for discounts. But Uber could also use what it calls its “logistics expertise” to sell restaurants data to target new customers, predict demand spikes, and boost rankings. It’s a complicated system, but it provides a straightforward takeaway: Uber has another new way to make money. Something that will definitely assist with its IPO valuation.  

Major US ports set import record in October

The NRF reported that major US container ports set a new monthly imports record in October. Container volume was up 9% from September's level and 13.6% year over year, according to the NRF's Global Port Tracker report released last week. The record was set as retailers continued to bring merchandise into the country ahead of a now-postponed increase in tariffs on goods from China. NRF officials said, "President Trump has declared a temporary truce in the trade war, but these imports came in before that announcement was made." While cargo numbers do not correlate directly with sales, the import surge also is being driven by this year's strong retail sales, NRF officials said.

Walmart snaps up

The Hustle reported that Walmart acquired last week, adding the company’s home decor business to its growing roster of acquisitions. To challenge Amazon’s e-commerce dominance, Walmart has spent hundreds of millions acquiring successful companies that enhance its “category expertise” and “assortment” - and now sits alongside past buys like, ModCloth, and Bonobos, giving Walmart a strong (and immediate) foothold in the US$10 billion art and wall decor market. The short story: Amazon kills off its e-tail rivals, Walmart just buys them.

Customer (dis)satisfaction with supermarkets

Inside Retail reported that “Foodland beats Aldi for customer satisfaction.” According to research by Roy Morgan, Foodland scored 91%, against Aldi's 89%.  We think that this is bad news for Foodland.  If a premium supermarket is only 2% ahead of a discounter in the customer satisfaction space, then, given the price differential, they have little hope for long-term survival. BTW: Inside Retail noted that Coles was at 85%, Woolworths on 84%, and IGA at 80% - so these chains have even less chance to compete with Aldi (and soon Kaufland). Without doubt, wherever Aldi opens an outlet, it will take a market share from them.  Overall supermarket customer satisfaction declined by 6% compared to this time a year ago.