Rishi Taparia - Issue #51
This week we look at how even Amazon has crashes (but it doesn’t matter), Walmart teams up with Microsoft, bookstores (yes bookstores!) are seeing a resurgence, WeChat Pay making moves in the US, what babies really think about and more. Enjoy!
Commerce
Amazon's Website Crashes on Prime Day
Amazon’s website crashed on their fake shopping holiday (which happened to be 36 hours this year), resulting in customers getting pictures of various dogs. For me, the outage proved two things: 1) even Amazon isn’t infallible and 2) even outages can’t stop Amazon. The retail giant had their biggest Prime Day sales ever, with over $3.6bn in sales compared to $2.4bn last year. Now, while the outages didn’t hurt sales (much), that didn’t deter some competitors from throwing Amazon some major shade. Office Depot, for example, sent out an email, “Tired of looking at dogs? Our deals are still up.”
Walmart Partners With Microsoft To Battle Amazon
The enemy of my enemy is my friend? Walmart has deepened it’s partnership with Microsoft, going beyond simply working on a rival Amazon Go experience. The retail giant is also shifting what looks like a majority of their .com properties over to Microsoft Azure, Amazon’s AWS competitor. The evolution of the anti-Amazon consortium building will be fascinating to see. If not for the Trump Administration’s approach towards China and Chinese companies, I would have thought Alibaba to be more of a natural partner than Microsoft given they are years ahead when it comes to the ‘future of commerce’ experience.
Bookstore Sales Up in May
Who said there’s not a market for books? According to the US Census Bureau, bookstores in the US sold $745m worth of physical, good old fashioned books, up $45m from May last year. Shop local and keep buying those paper books!
Rents keep dropping in New York as a new wave of retail moves in
It looks like not all real estate prices in New York are up up up. Average rent prices in a dozen of 16 main retail corridors in New York decreased over the past 12 months leading to new b&m retailers setting up shop. The most active tenants were food and beverage shops which doesn’t surprise me - nothing gets people excited like the hot new boba spot around the proverbial corner!
FinTech
Tencent to push WeChat Pay in US despite trade war with China
Tariffs, smariffs. Tencent is making a push to increase WeChat Pay acceptance in the US in an effort to drive usage for the 3m or so Chinese tourists that visit every year.
“The first step we will choose some merchants which Chinese tourists like, just like some outlets and duty free, some famous restaurants, and maybe the next step we will try and find some smaller merchants, just like a supermarket, some convenience stores, some transportation (services) like taxis. We will choose the big merchants that Chinese tourists like, then, when it has showcased, we will try to expand it to small merchants,”
It’s a new approach by the company which has traditionally relied on partnerships and resellers to push international adoption, unlike it’s rival Ant Financial which has set up local offices in an effort to aggressively penetrate new markets. Retailers big and small would be wise to take note of the spending desires of Chinese visitors and their desired way to pay. WeChat and Alipay will need to ensure they understand the developed markets and the difference in go to market strategies between here and China in order to find success.
Tencent and Alipay set to lose $1bn in revenue from payment rules
New central bank rules ban online financial giants from investing customer funds which is likely to result in a massive hit.
In January 2017, the People’s Bank of China announced that it was requiring third-party payment groups to keep 20 per cent of customer deposits in a single, dedicated custodial account at a commercial bank and specified that this account would pay no interest.
In April, the ratio was increased to 50 per cent, and last month, the central bank announced that it would raise the reserve requirement to 100 per cent by next January. At that point, payment groups will earn zero interest on all customer funds.
Technology
Walmart may launch a video streaming service to battle Netflix, Amazon
Video killed…the superstore? Walmart now seems to want to offer every day low prices in video streaming as well, apparently considering an $8 / mo video streaming service to compete against Amazon Video and Netflix. It’s not the most natural business to enter, but one could squint and make the argument around capturing consumer interest in order to drive better share of time and thus wallet, creating cross selling opportunities that lead to economies of scale which allow one business to pay for the other and…wait…this sounds a lot like…Amazon?
Random Tidbits
For Babies, Life May Be a Trip
I’ve always wondered what babies and toddlers are thinking every day. Most babies for me are a mix of Stewie from Family Guy and the babies from the Rugrats. New research suggests instead that their inner lives may resemble a dream or a psychedelic trip.
Compilations by Austin Value Capital
An incredible set of compilations, well worth reading for any investor. Amongst the compilations are the complete set of Buffet letters, Bezos letters, Keyes, Google and more.
Quote I’m Thinking About: “There is no such thing as a ‘self-made’ man. We are made up of thousands of others. Everyone who has ever done a kind deed for us, or spoken one word of encouragement to us, has entered into the make-up of our character and of our thoughts, as well as our success.” George Matthew Adams