DIpil Das
FROM THE DESK OF DEBORAH WEINSWIG
Could Supplemental Employment Benefits Be Behind the Strength in US Retail Sales?We have seen an astounding rebound in US retail sales, which turned positive in May and posted significant gains in June and July. Generous unemployment benefits may have helped to fuel the rebound in consumer spending.
As shown in Figure 1, there was a substantial pickup in government social benefits to consumers in April through June, which appears to precede the increase in retail sales by one to two months. While a causal relationship is not evident, the benefits still injected an extra $2–3 trillion into consumers’ pockets—which gave consumers more power to make retail purchases. In April, nonessential retailers had closed stores and consumers had started to shelter at home. [caption id="attachment_115496" align="aligncenter" width="700"]
Source: US Census Bureau/US Bureau of Economic Analysis/Coresight Research[/caption]
The outlook remains varied as to whether the $600 in weekly supplemental unemployment benefits provided by the US Coronavirus Aid, Relief and Economic Security (CARES) Act will be extended. On August 8, President Trump signed an executive order providing another $300 in additional weekly benefits and called on states to provide an additional $100 per week—with benefits retroactive to the week of August 1. At the time of writing, the Federal Emergency Management Agency (FEMA) had approved applications from 30 states under its Lost Wages Assistance Program. The US Labor Department estimates that it will take around three weeks on average for unemployed persons to receive the extended benefits.
Still, these additional benefits do not represent a long-term support program. The executive order authorized $44 billion in funding, which would provide less than six weeks of benefit, based on half the $16.6 billion weekly benefit provided by the original $600 billion program. Thus far, the US Congress has been unable to come to an agreement on how to extend the prior benefits. August retail sales figures cannot have benefited from the supplemental unemployment benefits, which expired at the end of July—however there is the possibility of optimistic consumer behavior in anticipation of the extension of benefits and high levels of consumer savings. Given the persistently high level of new unemployment filings, Congress will have to come to an agreement on a long-term solution, particularly as we approach the crucial holiday retail season.US RETAIL AND TECH HEADLINES
Best Buy Posts Strong Second Quarter; Digital Sales Surge 242% (August 25) Company press release- Enterprise revenues posted by consumer electronics retailer Best Buy grew 3.9% to $9.9 billion in the second quarter, ended August 1, 2020. Comparable sales were up 5.8%. The retailer’s digital sales were up 242%, primarily due to higher conversion rates and increased traffic—comprising around 53.1% of total domestic sales—compared to 16.1% last year.
- Best Buy CFO Matt Bilunas stated, “As a result of the ongoing uncertainty, we are not providing financial guidance today. However, I would note that we are planning for third-quarter sales to be higher compared to last year but likely will not continue at the current quarter-to-date level of approximately 20% growth.”
- Department store retailer Nordstrom’s total revenues contracted 51.9% to $1.9 billion in the second quarter, ended August 1, 2020. The sharp fall in revenues was largely driven by the temporary store closures for approximately half of the reporting period and an around 10-percentage-point timing impact from the Nordstrom Anniversary sale shifting to the third quarter.
- Nordstrom reported a net loss of $255 million in the second quarter versus net income of $141 million during the year-ago period. The retailer’s digital sales fell by 5% during the same period.
- Amazon has rolled out a new augmented reality (AR) tool called Room Decorator. The newly added feature allows shoppers to visualize multiple furniture and home décor products in their own living space. The feature is currently available to 50% of Amazon iOS mobile app users in the US and will be rolled out to all US shoppers in the coming weeks.
- The feature also offers suggestions of complementary products and allows shoppers to simultaneously visualize these recommendations and rearrange the products. The products viewed using the AR tool are displayed in high definition and to scale.
- German grocery retailer Lidl has announced an investment of over $500 million toward the opening of 50 new stores by end of 2021. The company expects the openings to create around 2,000 jobs.
- The company is set to open 10 stores in both Maryland and New Jersey, seven stores in Virginia, six in both New York and Georgia, five in North Carolina, four in Pennsylvania and one each in Delaware and South Carolina.
- Lifestyle products and services company Urban Outfitters posted a net income of $34 million in the second quarter, ended July 31, 2020. The company recorded $0.35 earnings per diluted share—beating the consensus estimate of a loss of $0.40 per share, according to FactSet. Comparable retail sales fell by 13%, impacted by store closures and lower store productivity after reopenings. Total net sales fell by 14% in retail and 51% in wholesale.
- Urban Outfitters CEO Richard Hayne stated, “’I am pleased to announce that Urban Outfitters produced solid revenues and profits for the second quarter, driven by strength in the digital channel. Notably, all brands were profitable and enter the fall selling season with lean inventories and positive momentum.”
EUROPE RETAIL AND TECH HEADLINES
Marks & Spencer Launches Click and Collect Service (August 24) Company press release- British retailer Marks & Spencer has partnered with Doddle, an e-commerce solutions provider, to trial new Click & Collect technology in many of its stores. The retailer is set launch Click & Collect in-store contactless collection at its Camberley, Hempstead Valley and Longbridge stores.
- This service will give shoppers the convenience of contactless collection without having to leave their vehicle. This initiative is in line with the retailer’s “Never the same again” program, which involves quickly adapting to digital technologies.
- British international grocery and general merchandising retail chain Tesco has announced that it will generate 16,000 new jobs in the UK to support increasing customer demand on its digital platforms.
- The company stated that most of the job roles are expected to be filled by temporary staff who joined the company at the start of the coronavirus pandemic.
- Olaf Koch, CEO of German wholesale company Metro, will resign from his duties at the end of the year. His resignation came a year early, as his current term was set to end in 2022.
- Koch steered Metro during its separation from its electronics branch Ceconomy and has helped the company to transform into a wholesaler. The retailer has not yet announced a successor.
- John Lewis has partnered with Qudini, a customer-experience management platform, to launch a new virtual queuing system at its stores, which it will trial over four weeks. This system will enable customers to wait for their turn from the comfort of their car.
- The virtual queuing system lets customers track their turn in the queue in real time through SMS updates.
- Home-furnishing retailer Bensons for Beds is launching a range of sustainable rolled-up mattresses and has partnered with Stacey Solomon, a TV personality, as its brand ambassador. She is the first major brand ambassador appointed by the retailer as it steps up its transformation scheme.
- The transformation efforts are also evident in the company’s launch of a new web platform and the new Rollo by Slumberland ready-to-go mattresses. The move comes after the retailer secured £25 million ($33 million) through a restructuring deal in June.
ASIA RETAIL AND TECH HEADLINES
Alibaba Upgrades Luxury Channels To Boost Engagement with Chinese Gen Z Consumers (August 25) Alizila.com- E-commerce behemoth Alibaba has implemented new features on its luxury platforms, Tmall Luxury Pavilion and Luxury Soho, in order to boost its appeal among Gen Z consumers in China.
- The new features include a daily luxury-specific livestreaming service, a content-rich magazine channel featuring fashion news, and an upgraded membership program that provides personalized services.
- Singapore-based high-end shoe label Pazzion has launched its first store in India at DLF Avenue Mall, Saket, New Delhi. The brand is confident of strong sales during the upcoming festive and wedding season and has significant expansion plans for India.
- “We are delighted to turn a new leaf in the retail segment in India by launching our shoe-label Pazzion amidst the pandemic. With so many fashion-conscious women, India becomes an incredibly important market and that is what motivated us to launch the brand without any fear of growth and expansion,” reported Tom Ng, Founder of Pazzion.
- In an endeavor to address antitrust concerns, Apple’s South Korean unit has offered ₩100 billion (US$84 million) worth of support programs for consumers and mobile phone carriers.
- The tech giant has been under investigation by the country’s competition watchdog, the Korea Fair Trade Commission, based on allegations that it had forced the country’s three mobile operators—SK Telecom Co, KT Corp and LG Uplus Corp—to bear the cost of television advertisements and warranty service for its iPhones.
- E-commerce giant Amazon has opened a new office in the southern Indian city of Hyderabad, the company’s largest global office. The new office is the company’s first fully owned office outside the US, and its 41st in India.
- “Hyderabad is a known software tech talent center, and the government has been an enabler for us to have a campus this size. This is an important confirmation of how India continues to be important to Amazon,” said Minari Shah, an Amazon spokesperson.
- French swimwear brand Debayn has commenced operations in Hong Kong with the launch of a five-month pop-up store offering the full range of the label’s collection along with new products.
- The newly launched pop-up store is located on the walkway into the Lab Concept shopping mall, between Pacific Place and Admiralty Centre, in Hong Kong. It will stay open until November 25, 2020.