Starbucks CEO Kevin Johnson isn’t worried about competitors in the fast-growing coffee market in China. He says that competition is actually broadening the addressable market by introducing tea drinking Chinese to coffee. Starbucks has nearly 3,700 stores in China already and is generating double-digit transaction growth. For Starbucks, their growth in China and around the world continues to be driven by providing a unique customer experience that is like no other in their industry.
Kevin Johnson, CEO of Starbucks, talked about how their unique customer experience is driving massive growth in China in an interview on CNBC:
We Are Playing the Long Game in China
The number one metric that we look at in China is total transaction growth. Those total transactions come from a combination of new stores that we build as well as same-store comps. We increased the number of stores in China by 18 percent this quarter and so if you put all of that together we had double-digit transaction growth in China. China is a market that is all about first mover advantage. It’s about building new stores and expanding our presence.
In fact, we’re now approaching 3,700 stores in China. We entered ten new cities last quarter and we’re now in 158 cities in China. The addressable market and the growth opportunity in China is significant. So the priority we have is really expanding our footprint while we continue to enhance the experience in our stores, drive beverage innovation, and enable new channels for customers to engage with Starbucks, as we are with Starbucks Delivers. We are playing the long game in China.
Starbucks Coming Out on Top in China
Whenever you have a large addressable market around coffee in China you’re going to have a lot of competitors come in. Some of those competitors are going to try and differentiate in different ways. They’re going to have to use price and be highly promotional in what they do. For Starbucks, we differentiate on the in-store experience. We differentiate on the quality of our coffee and we differentiate on the digital reach that we have through our partnership with Alibaba.
The one thing that the competition is certainly doing in China is expanding the addressable market for coffee. It’s introducing the Chinese consumer, who is primarily a tea drinking culture, to coffee. That’s helpful for the growth in the addressable market for Starbucks. We’re confident we’re going to play our game. We know how to create the kind of experience and leverage the brand strength that we have in China to create that unique differentiated opportunity for us to engage in customers. So I think if you look at the overall landscape of who is growing the most share of transactions and engagement with the customer, I think Starbucks comes out on top.
When you look at a competitor in China like Luckin and they talk about the number of units that they’re growing, I think sometimes a unit would look perhaps like a Starbucks store, but most of the times they look like a point of presence. That said, we have a lot of points of presence. We’re at 3,700 stores. We’ve also got our global coffee alliance with Nestle coming in with food services and CPG.
Extending In-Store Experience With a Digital Mobile Relationship
The reason you want to come to Starbucks is because we create that unique customer experience. We serve the world’s finest Arabica coffee. Our partners will handcraft that beverage to your perfection. We create an experience like no other in the industry. We’re going to continue to stay true to the experience we create in our stores and how we extend that experience with a digital mobile relationship.
The China Digital partnership with Alibaba is making great progress. We now have the virtual Starbucks store integrated into the Alibaba properties. That’s now reaching 600 million Chinese who use Alibaba on a daily basis. We think the strategy that we’re on is the right one. It’s it’s allowing us to continue to grow transactions in the double digits and we’re going to continue to play the long game with the strategy that made Starbucks what it is today in China.
Starbucks CEO Kevin Johnson says that cannabis-infused beverages are not on the roadmap. However, he seems open to that possibility in the future.
“You can’t get a cannabis triple venti today,” said Johnson in an interview on CNBC. “Certainly we’re well aware of what’s happening around CBD and THC and all the trends in the industry. There are a lot of of issues that we would have to think through on that. Right now that’s not on the roadmap. But we are mindful of the trends. We’re mindful of how CBD oils and CBD is viewed as a health and wellness item, so we’re going to keep watching this.”
“We’re staying focused on the beverage innovation that we’re driving and right now and it’s all about nitro,” the Starbucks CEO added. “We talked yesterday during the earnings call about how we’re deploying nitro and nitro cold brew across our entire portfolio of company operated stores. But we will always stay on top of consumer trends and new ideas.”
It does seem like Starbucks is leaving some room to jump into this market at a later date. So maybe someday, you will be able to order that cannabis triple venti! Could a future partnership with Canopy Growth be in their future?
Autonomous is an enormous technology, says Uber CEO Dara Khosrowshahi. Following the unfortunate accident that happened last year in Arizona, Uber took a retreat from autonomous vehicles. However, Uber has taken that time to rebuild how they are building that product.
“It will bring huge strides in safety, and huge strides in making transportation available to more people around the world,” says Khosrowshahi. “Anytime you have a technology that is as earth-shaking as autonomous, it doesn’t come easy.”
Dara Khosrowshahi, CEO of Uber, discusses their short-term retreat from autonomous vehicles and the growth and profitability of Uber going forward in an interview on CNBC at Davos 2019:
Autonomous is an Enormous Technology
We certainly took a retreat (from autonomous vehicles) based on the accident that happened that last year. We took that opportunity to really rebuild how we built product. But I do think that autonomous is an enormous technology. It will bring huge strides in safety, and huge strides in making transportation available to more people around the world. Anytime you have a technology that is as earth-shaking as autonomous, it doesn’t come easy.
If there’s one thing that Uber is about it’s about innovation risk. I don’t think it’s a have-to, it’s we want to be at the forefront. We want to be at the forefront of building out autonomous technology in a live network. We don’t need to build it for every single circumstance. We don’t need to build it for bad weather. We don’t need to build it for if they’re accidents, etc. We can build autonomous and launch it for simple situations one step at a time.
I think that the timeline (of launching autonomous) has proven to be more difficult than we thought. I think that regulation is going to play a big part in that introduction. I do think that because we run a live network the problem that we’re solving for us is going to be simpler than than anyone else. We are completely open to partnering with third-party autonomous because ultimately we believe in the technology. We want to be a part of it. It’s a great opportunity, but ultimately we think this will be good for society.
We Want to Build Sustainable Profitable Growth
What we want to build is sustainable growth that can be profitable. Sometimes near-term, for example, if you look at one of our largest and fastest growing businesses UberEats, home delivery of food. It delivers from over 200,000 restaurants in under 30 minutes. It’s a magical experience.
We have had cities in which the Eats product has become profitable. but essentially once we saw that program working we’re accelerating city launches and early cities early on are unprofitable. But we know that the model is sustainably profitable over a long period of time. So we think about near-term growth with long term profits.
Growth Now in Concert with City Regulators
I think that one area that we can control is making sure that our growth is now in concert with regulators the cities in which we operate. I think that in the past, and to some extent was a strength, but it’s not something that is sustainable, we grew just purely based on consumer demand.
We didn’t necessarily take the time to have a dialogue with society, with regulators, and with cities as to growth that serves all of the constituencies. We’re having that dialogue now. It sometimes causes complexity in our model and sometimes causes us to pause, but it creates a lasting model.
What’s special about Uber is we’re part of life in the cities. Were a huge labor force etc., so we have got to take that time and have that dialogue. In the majority of municipalities, their goal is to improve life for their citizens and life with Uber, life with UberEats, life with Jump Bikes is better. It’s really a question of how we can achieve our goals but be respectful of some of the limits that they put on us.
This Isn’t About Privacy, These Are People’s Lives
What was happening was that my teams and operating teams, the folks on the ground in Mexico, in Brazil, and in the US, they all came to me and said, “Listen with the numbers getting this big and with our platform getting as large we have to take responsibility for the platform.” I’ve got to give credit to my operators. This wasn’t like the moral CEO coming down.
This isn’t about privacy, these are people’s lives. We’ve got to invest in safety even if it causes short-term pain and growth. We came together as a team and we’re building technology, we’re making sure that the background checks, etc., all of that is being done. We have a 911 button just in case something happens. There’s a whole host of activity going into safety and it came from the team.
Blockbuster was an $8.4 billion company that was taken down by a startup called Netflix that successfully shifted the habits of consumers. Blockbuster thought that people wanted the experience of picking out physical DVD’s and would not want to just download a movie. They were wrong and today Blockbuster is out of business and Netflix is valued at $147 million.
I want to tell you a story about a company that’s going to be a love story for some, a horror story for a few, a fantasy type of story for others, and then obviously a money-making story for the people that were involved. But before I tell you the story about this company I want you to be thinking about two words; shifting habits. I’ll come back to those two words in a minute.
Let me tell you this story about this company. It’s 1984, a company gets started, it has got a yellow and a blue logo and it’s called Blockbuster. Blockbuster is a great story. You’d go to Blockbuster with your girlfriend or your husband or your wife and say, “Do you want to go to the horror section?” “Oh no, maybe comedy. I’m almost certain this movie’s not going to be available.”
Blockbuster: Nobody Wants to Download Movies
That’s 1984, the year got started. Blockbuster after only nine years was worth $8.4 billion in 1993. By 1997, a company got started called Netflix and it’s only worth $50 million dollars three years later. At one point Blockbuster could have bought Netflix for $50 million. But they said, “I just don’t think that’s the direction the consumer is going. I don’t think they’re going to shift their habits to this area because people like the experience of coming to Blockbuster and actually seeing the DVDs they pick up. Nobody wants to just download the movies. It’s not going to be taking place. People are smarter than that,”
Well, 149 million users worldwide disagreed with them. Netflix went from being a $50 million company in 2002 to today it’s a $147 billion company. By the way, Blockbuster on September 23rd, 2010, went out of business. They filed bankruptcy for $930 million and they’re gone. What’s the moral the story? Netflix since Christmas their stock is up 50 percent. Just in 2019, in the first 19 days of the year, Netflix is up 35 percent.
The Moral of the Story is That Netflix Shifted Our Habits
Netflix is up. That’s a love story for some, a horror story for a few, a fantasy type of story for others, and an obviously money-making story for those of us that were involved. Now having said that, what do you mean by shifting habits? So many people want to be innovators and shift their industry. I want to be in there, but I want to be disrupting my industry.
Bezos shifted our habits and we stopped going to bookstores to buy books. He said I’m going to shift your habit of the way you buy books. That’s why Walmart is afraid of Amazon. Instagram shifted our habits of the way we looked at albums. When’s the last time you bought an album? The list goes on. Wikipedia put encyclopedia companies out of business. How many times have you gone to Wikipedia to find out about different things? All the time. The moral of the story is that Netflix shifted our habits.
Disney is about to come out with Disney Flicks or whatever they want to call it. I know one of the Disney executives said, “We’re not really trying to compete with Netflix. We like Netflix. I use Netflix. We are just going to put out our Marvel products and Star Wars products and all this other stuff.” But Netflix becomes the one that led the way.
No one even thinks about Red Box anymore because Red Box at first made sense. By the way, if you say I still use Red Box, you’re probably over 40 years old. I’m not trying to offend you, but if you still use Red Box you’re over 40. You go to Kroger or Ralph’s to get your movies.
Start Thinking About Shifting Habits
Stop trying to come up with a great idea. Starts thinking about shifting habits. Not Seven Habits of Highly Effective People. Shifting habits. How do people buy your product? How can you shift that habit? How do people buy the product from you? How can you shift that habit? Those who can become the Bezos, become the Zucks, become whatever you want to call it of their industry because they shifted someone’s habit.
That’s all you got to be looking at. Not all this other crazy fancy stuff. So by the way, well Facebook ever be put out of business? Yes, by somebody who shifts our habit. Zuck says, “There’s no way in the world that’s the direction people are going to go to.” The will go that direction. That could also happen to Amazon and other companies as long as a new innovator is able to shift our habit.
Nordstrom is the class act of the department store segment and doing everything right says Former Toys ‘R’ Us CEO, Gerald Storch. Unfortunately, that is not enough according to Storch because customers are deserting malls for ecommerce.
He predicts that only top-tier malls will survive and even those will have to adapt to attract millennials. For Nordstrom and other department stores to survive and thrive they will have to quickly need to learn how to make money on the internet.
Gerald Storch, former CEO of Toys ‘R’ Us and CEO of Storch Advisors, discusses the death of most malls and the need for department stores like Nordstrom to do better at making money on the internet on Fox Business:
Nordstrom “Doing Everything Right” But It’s Not Enough
Nordstrom is the class act of the department store segment. They are doing everything right. Everything people say they should be doing but it’s not enough. Their stores are in great condition. They invest in their stores, they’re beautiful. They invest in their people, their service is the best in the industry. You love going to Nordstrom.
They have great internet and have invested in their ecommerce sites. They have great data management and customer relationship management skills. They have great style, their merchandise is pretty good.
Customers Rapidly Deserting Malls for Ecommerce
But it’s not enough. There is a hole in the bottom of the boat and the water is pouring in and they can’t bail fast enough. That hole is that customers are deserting the malls and they are going to mass merchants off the malls and of course to ecommerce.
I don’t think it is the demise of the department store. I think the all-channel model will still succeed. But in order to be profitable, a department store like Nordstrom needs to learn how to make more money on the internet. You can’t just say do all the things in the bricks and mortar store, make them more experiential, etc. They’ve been doing that and it’s not enough.
You can see that in their results. Their high-end stores were up in sales only three-tenths of one percent over the holiday period. That includes their ecommerce which was up 18 percent. You don’t have to know a lot of algebra to know that their physical bricks and mortar stores were sharply negative during this season.
You need to embrace the inevitable. You can’t just build a sort of fancier stagecoach in order to prevent the advent of the automobile. You have to build a profitable ecommerce site. That requires redoing their business system in order to be profitable online.
Only the Best Malls Remain Viable Enough to Transform
We talk about ‘A Malls’, ‘B Malls’, and ‘C Malls’. The ‘C Malls’ are gone. They will become doctors offices, insurance offices, places to get your nails filed, that kind of a thing. They’re done. Forget about them.
The ‘B Malls’ are a mixed bag. Some of them will be fantastic mixed-used developments. They need to be repurposed. You can’t keep them the way they are. That’s for sure. You saw Google putting office space in there. I think you will see a lot of residential, apartment buildings along with streetscapes in those kinds of malls.
The ‘A Malls’ are still viable and they will be. They’re putting in great restaurants, theaters, entertainment, and successful concepts which attract young people, millennials, who have not really been going to the mall.
Glossier is both a beauty company and a tech company that is succeeding by staying incredibly connected to their customers. Glossier founder and CEO Emily Weiss says that they are building a people-powered ecosystem where they are co-creating with their customers.
Not only do they ask for feedback from their customers, but they communicate with them on a Slack channel directly. This level of communication with consumers makes Glossier unique and is what powers their product creation and innovation.
Glossier is a pretty unique kind of beauty company that’s also a tech company. So it’s hard for me sometimes to answer that question, are you beauty or are you tech? I think we’re both. Right now at a glance were about 200 full-time employees across three offices in New York, Canada, and London. We’re about 70 percent female. Our board is 60 percent female. Our engineering team is 50 percent female. It looks a little different than most tech companies. We just crossed last year well over a $100 million in revenue. We’re very excited about that.
The way we look at it is that we’re building this people-powered ecosystem. Since we launched four and a half years ago, we have co-created with our consumers. The reason we’re able to do that is because we know who they are. We have a direct relationship with every single person who buys something from us, unlike you all of the incumbent companies that have been built through retail channels. We’ve never existed through retail channels. We have no plans to exist through retail channels.
Using Technology to Do Things Differently
The reason being we think that through using technology we can do three things very differently than what all beauty companies have done in the past. One is channel. The second is discovery. The third is listening at scale. Fundamentally, we just think about how do to give people amazing experiences.
In that way perhaps we’re similar to Amazon in that they’re extremely devoted to the customer. We’re very devoted to the customer from the standpoint that we don’t want to put things that aren’t amazing into the world.
Since we launched we’ve always relied a lot on user-generated content and feedback. We really started out of a blog that began in 2010 that was all around this premise that people are going to drive purchasing decisions in the future. Not algorithms. Not upselling or cross-selling. If anything, upselling and cross-selling people’s opinions, helping to evangelize people’s voice such that people can decide what they want.
At Glossier, we’ve really taken user feedback and asked them for things like what products to make, and where to go in terms of pop-ups or countries. We have fundamentally been able to really change the relationship between brands and customers.
Make Incredible Things That Stand the Test of Time
Traditionally, the way that I grew up with beauty products and brands was always sort of from brands speaking top down to customers. They are saying you’re not good enough, saying you don’t know what you want, let us tell you what you want. Really dictatorial. In a way, not giving people enough credit to be able to say, hey, actually I use this deodorant every day. So I am an expert at this deodorant. Seriously, we are all experts on the things that we consume and the things that we use.
What we’re trying to do is provide the tools, whether it is the physical products that we’ve created over the last four years or the digital conduits that we’re creating now. In the future we hope to help people use their voice and say, hey, how can I help someone else talk about what they’ve learned about beauty and their products and hopefully inspire others.
We’ve just typically had a pretty simple premise which is making incredible things that can really stand the test of time. That has equaled so far building these very modern essential products that we hope become icons in the same way an iPhone or an Air Jordan became essential products. Hopefully in thirty years time Boy Brow will connect a fifteen year old in the Middle East to a billionaire in Silicon Valley and we’ll be cross generational and cross socio-economic.
We get very excited about creating quality things that make people want to talk about them. Just period full stop. Over 70 percent of our growth so far has been through owned, earned, peer-to-peer, or organic because people just fundamentally want to share that they enjoyed their Boy Brow.
For Us It Has Been Quite Analog
This is something that people are really curious about. I think especially in this age of machine learning for us so far a lot of it has been quite like analog. It’s just been posting on the platforms that we have or in our Slack channel, where we have a lot like several hundred top customers, and saying what’s your dream face wash?
Sometimes, that’s the way in which we will make product decisions. But typically, it’s really an art and a science. It really depends on the project and how involved we’re going to get versus just sort of say in the office what are we excited about?
Our Innovation Comes From Staying Connected
We stay very connected. Every every team at the company, we’re about a third TAC across engineering, digital product, data, and design. Then we have an in-house creative team and we have in-house R&D. I think we’re all very connected to the to the customer. We have all of our Net Promoter Score feedback and comments from every single customer who answers it.
We are constantly taking into a Slack channel that everyone from me to my assistant to an intern can read every day just to stay connected to the customer. Sometimes it’s a single comment or sometimes it’s a macro trend that we that we hear about the translates into innovation.
After 30,000 real-world driverless Lyft test rides in Las Vegas consumers have rated it an amazing 4.95 out of 5, says Lyft’s Chief Strategy Officer Raj Kapoor. He says that in the last 12 months the system’s gotten smarter and the ride has gotten smoother. “It has measured reactions and acts like a really good driver versus maybe an inexperienced driver,” says Kappor. “That’s a big change.”
Raj Kapoor, Chief Strategy Officer at Lyft, was interviewed by PCMag at the Consumer Electronics Show in Las Vegas:
Consumers Rate Selfdriving Lyft Rides 4.95 Out of 5
What’s changed changed in the last 12 months with our selfdriving tests is first of all the system’s gotten smarter. The smartness comes out in terms of planning and prediction. You can now tell how smooth the selfdriving ride is. If it’s seeing pedestrians or lots of cars it doesn’t make knee-jerk reactions. It has measured reactions and acts like a really good driver versus maybe an inexperienced driver. That’s a big change.
Two is that we broadened the area that we’re operating significantly. We’re operating a geofence that covers almost all the major hotels in Las Vegas and you can go anywhere in that area versus very specific points.
It’s one of those rare instances where a cool demo from CES right away becomes a live service. We have now 30,000 rides that we’ve had in the system and so far the feedback has been awesome. Consumers have rated it a 4.95 out of 5 stars and 9 out of 10 people that go on a ride would come back and do it again.
We’re really quite pleased with it. I think people have a lot of questions around self-driving, there’s some fear, but once they get in and do the ride they are really excited about it and ready to do it again.
It’s using the same scale as normal Lyft rides and in their mind it’s that same perception of how comfortable, clean, did the person or the robot drive well, all those things go into account. The automated Lyft is rating pretty high but the human drivers definitely get up there too. But 4.95 out of 5 is very respectable.
Lyft Using Las Vegas Data to Perfect the Selfdriving Ride
We can notice a lot of things with this real selfdriving test. Las Vegas is a great proving ground because there are so many people from around the world that come here. You’re not just having residents that are here. You’re having people that are using it for their vacation, using it for going back and forth, so we’re able to collect lots of data from a big diverse group of people.
We’re able to see what the repeat use is like. What do they like about it? What do they dislike about it? How much do they like to walk to the vehicle versus not? There are all these little nuances that go in.
Another example is around remote assistance. We noticed that the people love to have a conversation with the safety driver. They’re so excited at that moment. The question we have is as we move toward a future without a safety driver is how do we still get that interaction with the consumer? Can we have a remote assistant do that? We’re learning all these little things by being in the real life out there with people.
In fact, there are two people in the front. There’s a safety driver and also a safety engineer that’s in the front. So usually it’s the safety engineer that’s answering the questions. The safety driver is very focused on the road.
What doing now is developing remote assistance systems where you can talk to a lift operator and ask the questions that you need to ask via a very conversational interface with the consumer. There’s a lot going on there and there’s a lot going through their head around building trust. What is this car seeing? Is it acting the way that I would act? Then asking questions about how does that technology work? How can it do this?
More Human Drivers Will be Needed, Not Less
Going to the question around drivers. We still believe that there will be a need for more human drivers than there are even today. If you look at it these ride-sharing services in the US make up about 0.5 percent of vehicle miles traveled. Even if we go to 5 percent and the majority of rides become self-driving, if you do the math on that growth of the overall number of rides, you need even more drivers than you have today.
Also, this technology is great but it’s going to be slowly rolled out. It’s going to take a while for it to be able to do all conditions, all places, all the time.
We haven’t even begun to imagine around the new economy that comes out of self driving vehicles. There’s so much infrastructure that needs to be built around parking and charging and even mundane things like cleaning cars. Then there are serve there are groups of people that need to have assistance, whether it’s elderly people, people requiring physical assistance, or young children. We think there are going to be opportunities abound.
Obstacles to Overcome with Driverless Cars
There are a number of obstacles to overcome with driverless cars. Can I trust that this vehicle is going to operate safely, not just for me but for all the environment and community around us?
Two, is the technology itself. I think we’re on a good path and we’re improving but it’s going to take some time to get there. The other piece of it is that the cost of the vehicles are significantly expensive right now. They’re using expensive computers, expensive sensors, and they’re not made necessarily to last for a long time because they’re in a lot of R&D stage.
So the reliability and the costs have to get better. Then on the government side, the regulations that need to allow for this to flourish. We’re seeing good progress there. If we continue to have a federal level on safety standards then that’s something that’s really positive because it’s not going to be that you have to create a specific car for specific jurisdiction. We think those are the barriers but they all seem very doable.
Surprised at How Quickly Micromobility Has Taken Off
We classify all this (scooters and bike) as micromobility. What we found is that there’s really an unmet need for that zero to two-mile range short distance trips. Yes you could take a Lyft or you could potentially walk but you’re in that zone, especially if it’s a half a mile or more. It is a really convenient thing to do. It’s also a really fun thing to do whether you’re biking or scooting and especially if it’s electric propulsion.
I’m also surprised at how quickly that has penetrated but I think we’re living in a world now where there’s mass adoption, there social networks, and the innovation that’s coming that came in software so fast we’re seeing in hardware. New versions of scooters are about every month. There’s some loss rate and breakage rate that is acceptable given the high usage and it works for the consumer because it’s still a very reasonable price to get around town.
Lyft Helping Society Shift Away From Owning a Car
For people not to own a car, it’s really going to be a stitching together of a number of different modalities. Whether it’s bike, scooters, walking, or ride-sharing together, to provide a really good alternative to owning a car, which is expensive, a hassle, has parking, congestion, and emissions. It’s a really big problem that all these things together are going to be solving.
We want to get them from point A to point B in the most convenient way that they could get there and without owning a car. That’s the key criteria.
I think there will clearly be a big group of the population, especially that lives in cities, that really will not be able to justify owning a car. All the use cases that you’re thinking about you could utilize by short-term rentals, car sharing, ride-sharing, micromobility, or also public transit.
We’ve integrated into public transit and it’s the best way to get around in a lot of instances and we’re feeding into that. There’s a lot of inertia still about buying a car and some people are still wrapping up a car in their self-worth and their identity. That’s changing, especially with young people.
Apple CEO Tim Cook released a letter yesterday saying that Apple is lowering their guidance for the fiscal 2019 first quarter, which ended on December 29. He attributes almost 100 percent of the revenue shortfall to their business in China:
“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China. In fact, most of our revenue shortfall to our guidance, and over 100 percent of our year-over-year worldwide revenue decline occurred in Greater China across iPhone, Mac, and iPad.”
Cook attributes their China problem to issues such as China’s overall economic slowdown partially due to trade tensions with the United States. Many analysts believe that the biggest reason for slower sales in China is actually Apple’s high price point for their newest phones and this is only exacerbated by China’s weakening economy.
Apple Services Growth is Apple’s Future
One silver lining in Tim Cook’s letter is his announcements about the growth of Apple Services worldwide. Cook says that Services generated over $10.8 billion in revenue during the quarter, growing to a new quarterly record in every geographic segment. He says that Apple is on track to achieve their goal of doubling the size of this business from 2016 to 2020.
Apple CEO Tim Cook discussed the incredible growth of their services business as part of an interview on CNBC:
Services Has Grown an Incredible Amount
Services has grown an incredible amount. We’re going to report over $10.8 billion when we report later this month for last quarter. That’s a new record. This is incredibly exciting for us because so many things hit records in there.
The App Store did. Apple music hit a new record. Apple pay hit a new record. Our search ad product from the app store hit a new record. iCloud hit a new record. It’s very wide. Each of the geographies hit a quarterly record.
Services Business Driven by Huge Installed User Base
Even in China, the App Store hit a quarterly record. Why is that? It’s because have and our installed base grew nicely year over year in China as well. As I say in the letter we’ve picked up a 100 million more active devices over the last twelve months alone. This is an incredible number.
We’ve also got some interesting things in the pipeline on services and of course, we do on products as well. That’s sort of another way to grow the company.
There’s a big business to be built even just on the medical side of legal marijuana says legendary technology investor Geoff Lewis. Lewis was an early investor in Tilray which recently had a hugely successful IPO of which he was pleasantly surprised.
Lewis thinks the worldwide trend is toward recreational legalization of marijuana and that bodes well for Tilray. “I think quite honestly the US is behind other countries on that score,” says Lewis. “So TBD here, but around the world, the trend is very much toward recreational legalization.”
Geoff Lewis, the founder of Bedrock Capital and an early tech investor in many companies including Tilray, the global leader in legal marijuana, Lewis recently discussed the recent Tilray IPO and the future of legal pot around the world on CNBC:
I Didn’t Think the Tilray Founders Actually Used the Product
One of the reasons I invested in Tilray, via Privateer Holdings, the creators of Tilray back in 2014, was that I didn’t think the founders actually used the product. I spent a lot of time trying to diligence whether I thought the team was actually using it and they weren’t.
The reason I cared is not that I have anything societally against it, but it was illegal at the time. The company was based at the time in Washington State where it was not legal.
At this point, I do think the trend has really dramatically shifted from back when we invested in Tilray in 2014 and it’s now obviously a publicly traded company. It’s a big win and we’re really lucky to have been able to back those founders early on. But there were only a few countries in the world where there was a medically legal framework and now there are over 30 countries.
There’s Big Business to be Built on Just the Medical Side
We didn’t know the IPO was going to be as successful as it was, that was a pleasant surprise. I would say that we did believe that regulation ultimately follows what society wants. We felt back in 2014 when we made the investment that most people in most countries believe it should at least be medically legal and the regulations were very expected.
There’s big business to be built just on the medical side. I do strongly believe the trend is toward recreational legalization. This is certainly true in many of the Western European countries and South America. I think quite honestly the US is behind other countries on that score. So TBD here, but around the world, the trend is very much toward recreational legalization.
Walmart is looking at delivering groceries right into your fridge says Walmart Ecommerce President and CEO Mark Lore. And the step after that Lore says is delivery without even ordering, presumably using IoT technology to keep track of your refrigerator inventory.
Mark Lore, President & CEO of Walmart U.S. E-Commerce and Founder and CEO of Jet.com discussed the future of ecommerce on CNBC’s Mad Money:
Our Stores are Hybrid Warehouses
This is very exciting and this is one of the reasons why I was so excited to come to Walmart. There are 4,700 stores within 10 miles of 90 percent of the population, fresh and frozen and every one of these stores just about, and we’re doing pickup free pickup on groceries in 2,100 stores and started rolling out same-day delivery as well. We should have 40 percent of the population covered by the end of this year and 60 percent of the population covered by the end of next year.
Our stores are hybrid warehouses. But what’s really interesting is that we’re moving stuff in full truckload quantities. If you think about it, these stores that are doubling as warehouses are already profitable before the first pick. So we have a lot of like good turning inventory and the food is fresh.
Stores Are a Huge Advantage with Same-Day Delivery
We’re charging for delivery and customers are paying for it so that’s sort of a wash. We’re picking product in the stores that already have a really good sort of marginal profit because the stores are already profitable and our fixed overhead is covered.
I think this is a big advantage (over Amazon) and one of the reasons why I’m so excited to be at Walmart. Stores give Walmart a huge advantage in this sort of like Omni approach to retail.
Walmart Planning Delivery Right Into Your Fridge
Think about the next level from that, delivery right into the fridge. Basically a one-time code, they come in with the camera on their chest, you can watch it on your iPhone and see them come in and put it in your fridge and leave. This will build confidence and trust in these Walmart associates doing the delivery. Imagine going to work and coming home and there’s the stuff in your fridge already. That’s the next step.
Take it a step further, not even having to order it. How about just being able to keep you in stock on everything you need and just not even having to think about it.
Based on a successful delivery trial in China via Alibaba and Uber Eats in Miami, Starbucks has announced that they are adding delivery nationwide. Starbucks COO Rosalind Brewer says they are still looking at the total cost of delivery very “carefully” but they are emboldened by the higher average sale with delivery orders.
Starbucks Delivery via Uber Eats Expanding Nationwide
We’ve had a great trial in Miami and we chose Miami because we know what the temperatures are in Miami. We’ve seen great drink consistency. We’ve seen really good leverage on the ticket, so we’re seeing both food and beverages being ordered. We’re seeing a much larger ticket when we see a delivery from Starbucks.
We’re really pleased that we’re doing this partnership with Uber. We’re learning a lot about technology integration and that’s the real result here, just really making sure that the technology comes together and then we deliver the best product for the customer.
The question around is this a profitable opportunity for us is one of the things that we’re evaluating because it does cost more to deliver coffee. But we are seeing an expanded ticket and that average ticket is really what we need to see happen as we approach delivery. We’re encouraged right now but we’re actually monitoring that very carefully.
Learned From the Alibaba Partnership in China
We’re using a lot of the learnings from China in terms of things like packaging. Not only is it an automobile delivery, we’re seeing that it’s bicycle delivery as well. So we’re understanding that very well. We’re also understanding what is the offering? Should it be the full menu and what dreams do best when they have to be delivered?
State of the Starbucks Economy
What we’re seeing right now is that something like a Starbucks cup of coffee which some assume is an affordable luxury, we’re really comfortable right now. I will tell you one thing about our holiday season that we’re in right now. We learned a lot from what we did last year and we’re really encouraged by the reusable red cup that we entered this year.
We’re doing marketing campaigns and every time we see the Starbucks name mentioned in media we get a pop in our performance. So we’re really pleased with what we’re seeing and we’re a little bit less concerned with the turndown that everyone’s talking about.
When you look at what Starbucks is doing particularly in China and in the US is that we’re still opening new stores. In China, there is still a lot of addressable market for us to participate in. You’ll see us be pretty bullish on the work that we’re doing with new stores and we’re adding delivery which is all incremental business. At this time there’s opportunity for us to continue to grow but we’re watching carefully some other things that are happening globally.
Beverage Innovation is Our Biggest Driver of Growth
The biggest driver of growth for us going forward will be our beverage innovation. You saw us earlier this year introduce a new espresso. You’ll see us bring more of our learnings from our roasteries in terms of what can happen with our beverage innovation. You’ll see us talk more about our Cold Platform, things like our Nitro Cold Brew, and then some of our other beverages that are really doing well for us right now.
It’s no secret that personalized marketing can solidify brand loyalty, improve customer experience, and boost profit margins. In fact, one recent study showed that persuasive personalization can have a positive impact on revenue by as much as 15 percent.
However, personalization is a challenge in itself. Traditional marketing would make use of what the shopper bought and their body language, but that’s not so straightforward with eCommerce as the decision-making process is different when consumers buy online.
What is Digital Body Language?
It’s a fact that most people use their feelings more than logic when they make purchasing decisions. This means that marketers can’t just rely on what customers bought in the past since there’s often no logical or repeatable pattern to reference. Instead, they’ll need to have a better understanding of the customer’s state of mind.
A more effective strategy is to look into the shopper’s digital body language. This refers to the amalgamation of signals and digital gestures made by consumers, like taps, scrolls, zooms, and the movement of the mouse. In short, it’s how people behave on social media, websites, emails, etc. For instance, how many times they post on a social media platform, what platform they usually use, how many times they visit a site and what they click on when they’re at a specific website.
Digital body language is a good way of discerning patterns and can help in understanding a shopper’s mindset and behavior. Marketers can measure this data objectively and learn where the client is in their shopping journey, what products they’re interested in and even when they should be sent a sales offer.
How to Boost Sales With Digital Body Language
Internet users always leave a trail of their actions online. As a marketer, you can use that trail to your advantage. Digital body language can give you a broad overview of your demographic. For instance, you can track the popularity of each page on your website to find out what content your customer’s like. Meanwhile, your customer’s location will give you an idea where to concentrate your efforts. The more data you accumulate, the more you can improve your sales.
Determine if the Shopper is a Good Lead
If a consumer has visited your site, cookies or a tracking software will tell you how many times they visited, the dates and time, and even what pages they went to. If the shopper visited your site several times a month, then you know they’re interested in your brand and are potentially a good lead.
Improve Your Website Design
A consumer’s digital language can also give you ideas on how to improve your website. If the visitor is taking their time browsing your product page, it could mean that they’re interested in what they’re seeing. A slow scroll down the page can also mean the visitor is invested in what they’re reading.
However, a visitor clicking on your page several times in rapid succession could mean they’re confused or frustrated. Perhaps they’re expecting something more interactive or they’re looking for something specific and can’t find it. The same goes for rapid scrolling. The customer might be navigating from page to page because they’re confused with the layout. This type of behavior can tell you what pages you can improve.
Provide Real-Time Response
Once you have a good grasp of your customer’s digital body language, you can work on providing them with a more humanized and positive customer experience in real time. Banners, pop-ups, recommended content, and customized call-to-action buttons are good examples of real-time responses.
Live chat is also an effective response to a shopper’s digital body language. For instance, if the prospective client is hovering their mouse over a button, it could mean that they’re hesitant or confused. It’s the perfect time for a chatbot to appear and offer help or even recommend a product or deal.
Digitalization is the Future
You can’t stop digitalization, especially now that they are means to understand shopper’s online behavior and emotions. While the majority of your site’s visitors are likely to be anonymous, you can tailor your site to read their digital body language. This will help you collect vital information about them, like what time is the best to send an email or whether they will be interested in a webinar or white paper. It will also help you build a good relationship with current and prospective clients.
Consumers have now shifted up to 11 percent of their shopping online and this means that the US needs to get rid of 11 percent of their physical stores, according to former Macy’s CEO Terry Lundgren. He says that overall the consumer is healthy and spending but that doesn’t mean that physical stores shouldn’t close to match supply and demand.
Terry Lundgren, former Macy’s CEO, discussed the health of the economy and the need to close more physical stores on CNBC:
The Consumer is Healthy and Spending
If you just look at all of the numbers week after week you’d have to say that the consumer is in very good shape, as good a shape as I’ve seen this consumer. Obviously, GDP is driven by consumption and the numbers are good. You’ve watched retailer after retailer putting up really good numbers, top, and bottom line. They’re even raising earnings and guidance in some cases, and getting no credit for that by the way in most cases for their stock price. I think that has nothing to do with how the consumer is responding.
I think the consumer is healthy. I think the consumer is spending. I think the stores are busy. More consumers are shopping both online and in-store and I think that’s really good for business because they spend more when they’re in a physical store than they do when they do it when they’re online. We’re set up for a very decent finish to the year.
This Country is Way Over-Stored
There has been an oversupply of physical retail stores in this country, and it’s this country by the way. This country is way over-stored. We’re at 23.2 square feet per human being in the United States versus 16 in Canada and 4.8 in the UK and then they get smaller from there. We’re just way over-stored, so there has to be a contraction. I can tell you in the case of Macy’s two years ago they’ve done this and closed 20 percent of their stores.
That’s what has to happen because of this shift to online that has occurred, which has been the reality. It’s still only about 10 or 11 percent of all retail sales by the way, but it is growing. You have to get rid of 10 or 11 percent of the physical stores just because of that and that hasn’t happened. So the answer is no we’re not there yet but when that does happen over time, supply and demand is back, that’s when you’ll see the physical stores begin to grow again.
The CEO of Walmart Doug McMillion says that the company has a lot of work going on to change the company. He says that the company is becoming more digital and is changing how they work from within to get faster, more nimble, and adapt to what’s happening in retail. McMillion is a real advocate of change within the company, pointing out that what has happened to companies like Sears can happen to us too.
Doug McMillion, CEO of Walmart, recently discussed how Walmart is becoming more digital and is adapting and changing in order to compete and improve the customer experience:
Changing How We Work to Get Faster, More Nimble and to Adapt
We’ve got a lot of work going on to change the company. The company is becoming more digital and we’re changing how we work from within to get faster, more nimble, adapting to what’s happening in retail. Those plans result in lower costs. We’ve been lowering prices for customers and we need to keep doing that. We’ve got to build this ecommerce business in a way where it delights customers all the time. We’re improving in many areas as it relates to that.
Then kind of the magic of Walmart is how we put it all together. Grocery pickup has been really great for us, we’re learning how to do deliveries. There’s a lot in front of us in terms of what we control and what we can do and that’s what we’re focused on. There’s a transition going on and change that is happening inside of all businesses and across industries. It’s certainly happening within Walmart.
We’re Learning How to Put Automation in Place
We’re learning how to put automation in-place like floor cleaners that are autonomous, and also an industrial robot with a camera on it that’s looking at the merchandise in the aisle so we know where things are. It’s learning how to communicate with a device that goes up and down the aisle that checks to make sure that things are in the right place, that they’re priced right, looking to see if we have inventory above if it needs to be pulled down, and helping us as associates do our jobs better.
I think over time automation will reduce jobs, there will be a period of disruption, but with our turnover in retail, we can manage through that. We want to train people, upskill them so that they can learn to do new things. As this change is happening now we’ve already seen new jobs like personal shoppers emerge, we’ve got about thirty thousand personal shoppers in the United States now that are picking grocery orders in the stores for pickup.
Grocery Pickup Business has Grown a Lot
One of the most popular things we’ve got right now is a grocery service where you can order on your mobile app, pick a time slot and on your way home from school with the kids swing through and we put it in your trunk and you take off. That business has grown a lot and there are people that now have new jobs creating that order for you. Folks come out to the car, put in the trunk for you, talk to you for a few minutes, and that’s gone really well.
What I really think will happen is we’re going to find new jobs, delivery jobs, and jobs related to customer service in the stores. We want to improve the environment the stores, we want our fresh food presentation to be better, we want our retail presentation to be better. We will redirect some of those positions towards that.
One Constant at Walmart is Change
The truth is after learning from so many people, a little bit from Sam Walton, David Glass, Lee Scott, Mike Duke, and the leaders at Walmart. We know that retailers come and go. Businesses grow and they don’t change enough and they decline over time. Retailers do that on a bit of a faster cycle so we got a healthy paranoia and always have.
If there were a group of Walmart associates around here right now and we asked them the only thing other than our purpose and values that are constant at Walmart they would fill in the blank with change. We adapt, we learn, we learn from competition, we focus on the customer, we’re always changing.
People Are Rethinking What Walmart is as a Business
I carry an app that’s got the top-ten retailers by decade back to 1950. There are company’s on here, TG&Y, E. J. Korvette, the rise and fall of Sears and others. It’s just a reminder that this can happen to us too. Part of what I do within the company is trying to make a case for change, point to a strategy and a vision for our associates.
We’ve got great people and they rally and move and change. It’s now happening at an accelerated rate inside the company causing people to rethink what Walmart is as a business and it’s really exciting.
Bitcoin.com founder and CEO Roger Ver is incredibly bullish on the entire cryptocurrency ecosystem despite recent reports of hacking. He says that if it wasn’t worth something or wasn’t useful hackers wouldn’t be wasting their time trying to hack it. Ver is focused on the bigger picture of taking cryptocurrency mainstream. He says that we need to build an economy that is actually using cryptocurrencies as currencies rather than just a lot of speculators speculating.
Roger Ver, founder, and CEO of Bitcoin.com, discussed the current state of cryptocurrencies from his home base in Japan with Bloomberg:
Incredibly Bullish on the Entire Cryptocurrency Ecosystem
Part of the excitement of cryptocurrencies is that nobody knows if it is going to go up, down, or sideways in the short-term. I’m a fundamentals investor so I’m investing in fundamentals. Long-term the future is brighter than ever. There is more awareness, there’s more adoption, there’s more stuff happening all over the world, so of course, I’m incredibly bullish on the entire cryptocurrency ecosystem and bitcoin cash specifically.
If anything it has brought additional awareness to the ecosystem and the fact that such big players are involved and the fact that hackers are trying to hack it is showing that it’s worth something. If it wasn’t worth something or wasn’t useful hackers wouldn’t be wasting their time trying to hack it. If anything it’s just more bullish signals that cryptocurrency is here to stay and here for the long-term.
The Industry Should Regulate Itself, Naive to Think Politicians Know Best
The industry is the group that’s the most knowledgeable about the industry. So, of course, there the ones that have the most incentive to make sure they do a good job in not letting their customers’ funds be hacked, not letting bad things happen to their users, because if bad things happen to your customers your customers are not going to be your customers anymore. So to think that a politician in some office somewhere knows more about how cryptocurrencies work and how to keep them safe from hackers I think that is just naive. It’s the industry participants that know the most and have the most skin in the game so they are the right ones to be handling this.
We Need to Build an Economy That is Actually Using Cryptocurrencies
We need to build an economy that is actually using cryptocurrencies as currencies rather than just a lot of speculators speculating. That’s been the entire goal of bitcoin from day one and the very title of the white paper, Bitcoin: A Peer-to-Peer Electronic Cash System. That’s the goal of Bitcoin Cash, both the ABC camp and the SV camp. I wish every cryptocurrency good luck if they are trying to bring more economic freedom to the world by making them useful as currencies for the world.
I think we need to build the tools to make it easy for people to use cryptocurrencies as money to buy and sell things, pay their bills, pay their rent, and even pay their taxes. We just heard about the State of Ohio excepting bitcoin cash and bitcoin through BitPay for taxes. That’s a pretty big step toward mainstream adoption. Not that I’m a big fan of taxes, but that’s about as mainstream as it gets when governments start accepting bitcoin currencies for taxes.
According to the Wall Street Journal Amazon is testing larger format stores with its Amazon Go cashierless technology as a prelude to a Whole Foods rollout. The WSJ appeared to have spoken with several insiders. “It is unclear whether Amazon intends to use the technology for Whole Foods, although that is the most likely application if executives can make it work, according to the people.” There are predictions by some experts and entrepreneurs that virtually every physical retail store will be checkout free within 5-10 years.
Walter Robb, former Whole Foods co-CEO, discussed the possibility of Amazon adding its cashierless technology to Whole Foods in an interview on CNBC:
Amazon May Go Cashierless at Whole Foods
I just think is part of a larger revolution that’s happening in retail and in food in general. The customers are having more and more options. Amazon Go, which is now up to 13 stores already has this deployed in a smaller store format. The application of this to a larger selection of products, most Whole Foods stores have about 35,000 units, is very exciting and very interesting.
I think we’re just seeing this massive wave of disruption and innovation in retail in general. What this does is, if you call the grocery business about $2 trillion in the US plus or minus, what you’re seeing is all these new ways in which the customer can get their food. This is part of that choice. I think one of the things that people miss about the Amazon Whole Foods merger is the fact that physical retail really matters. What this does is say, okay we’re going to try to make the physical experience a little more streamlined for people so it contrasts with the online experience. I think you just see this bevy of choices the customers never had and we couldn’t even imagine five years ago.
Whole Foods and Amazon Culture Clash Smoothing Out
It’s still early but I think Amazon and Whole Foods certainly have different cultures and different styles, but I think that Amazon has very smart and capable people and I think the cultures are beginning to find their way, both their work processes. If you think about what we at Whole Foods gained from Amazon, we got tremendous first best-in-class technology and data capabilities, the digitization of Whole Foods, was significantly accelerated.
I think for Amazon they got a great brand in fresh foods which they’d struggle up to that point. They got the knowledge of the customer in the physical stores versus just the digital world and they got proximity to about 85% of the US population. It was a real win-win-win combination. People forget that food is probably the largest sector in the economy. This is a very significant deal that happened and I think a proxy for the fact of how business and commerce in general are evolving so quickly.
On-demand is an infrastructure for the future of retail says Alibaba CEO, Daniel Zhang. He envisions a world where virtually every product, even pharmaceuticals, will be available to be delivered on-demand 24-hours a day to customers.
Daniel Zhang, Alibaba CEO, discussed the future of retail on CNBC International:
On-Demand Delivery to Power the Future of Retail
On-demand delivery is an infrastructure not only for the food delivery business. This is also an infrastructure for the future of retail. In terms of food delivery, I think today more and more young people need these services and they either don’t have time to cook or they simply don’t don’t cook so the people need this food delivery.
When we look at this on-demand delivery network this also can serve many other product categories. For example, people can order some medicine from some pharmacies at night if they catch a cold. This could be an infrastructure for the future of integrated digital business.
Every Business Will be Powered by Cloud
Cloud computing is our long-term strategy and we strongly believe that every business in the future will be powered by cloud. We are very happy to build this crowd infrastructure in the new digital era and support all the business to go digital. I think cloud will be the main business of Alibaba in the future.
Voice is the Next Entry Point of the Internet
We believe that voice is the next entry point of the Internet. If you look at the history of the Internet we have the PC times and people got into the internet by clicking. Then you have the mobile internet where people go to the internet by scrolling the screen. Now it comes to the voice age where people can go to the virtual world by our voice.
That’s why we started to work on Tmall Genie and we strongly believe this could be an entry point in the living room when people want to go to the virtual world. This is also how people not only enjoy the services by the voice but also can monitor the equipment and the facilities in the home.
In announcing a wide-ranging content deal with golf legend Tiger Woods, Discovery CEO David Zaslav says that what we’re trying to do is really create a golf Netflix. Discovery’s strategy is partnering with high profile personalities such as Tiger and Oprah and others to provide quality non-scripted programming globally. Zaslav says that they’re going to cede this whole idea of scripted, there are loads of people in that space and they’re fighting over it.
What We’re Trying To Do is Really Create a Golf Netflix
This is a wide-a wide-ranging partnership with the greatest golfer ever, Tiger Woods. He’s a transformational figure really. It’s a cherry on top of our golf strategy. We were in business with the PGA Tour everywhere in the world. We owned the tour globally with Jay Monahan and the PGA Tour, it’s a long-term partnership. What we’re trying to do is really create a golf Netflix, create an ecosystem where everyone in the world that loves golf can get everything they want on the phone and/or on EuroSport in Europe or on channels around the world.
It’s multifaceted and it fits our strategy. A couple of years ago we got into business with Oprah Winfrey, so we’re in business with Oprah globally. When we bought Scripps, food, HGTV, travel, people thought we bought linear channels but we bought IP. We owned food everywhere in the world, home everywhere in the world, travel everywhere in the world. We have natural history with Discovery.
We really took a big pivot four or five years ago where we went from a traditional nonfiction company to asking ourselves how do we create content that people would want if they could want anything and if they could see anything? It was a world that at that point people thought, why is Discovery getting into sports? Why they buy EuroSport? Why do they own all the cycling and all the tennis in Europe? Why did they do the Olympics?
We’re Going to Cede This Whole Idea of Scripted
We see golf, particularly with Tiger, tennis, cycling, the Olympics, food, home, and natural history. The rest of the media business is in scripted. Disney and Bob Iger, probably the best media company in the world when it comes to scripted and traditional storytelling. Tiger is really an important part of that strategy because people love golf everywhere in the world.
Think about China, two of the best players on the PGA Tour are from China. We own all the golf in China and they love Tiger. Two weeks ago we did a deal with Chip and Joanna Gaines from Fixer Upper and Magnolia. Two fantastic authentic great personalities, they’re back in our family. So we’re going to cede this whole idea of scripted, there are loads of people in that space and they’re fighting over it.
For us, that’s kind of like the soccer ball on a kids game and we’re the rest of the field. If people love food content or golf I think we have a real chance. We hope that we’re where the ball is going to be. Who’s above the globe? The FANG companies, they’re so powerful because they’re above the globe. They could reach everywhere in the world. The only media company that’s truly above the globe that has IP rights everywhere in the world is Discovery.
We Need to Reach All of These 4 Billion Devices
We haven’t over-invested in content because we do believe that we need to reach these four billion devices and the best way to reach that is to have stuff that people really want. This business started with cable systems around the world, then it went to satellites. The companies that have created the most value for shareholders are the global companies, because of the leverage.
What we’re saying is we think that by owning all of this global IP we can partner up very effectively. We don’t need to sell, we can we can partner up with any one of them. We can do a natural history global business with Google or Apple. We can go into business with Oprah ourselves and we can together reach every regional player in the world.
Our Bet is That We’re Completely Different Than the Rest
People fall in love with great stories and with people. If you think about the media business and the rush to Netflix, HBO, Hulu, those are all great plays. Disney buying Rupert’s company and he’s gonna build a product that looks a lot like it. If you’re sitting at home, whether you’re young or old, and you want to spend ten to fifteen dollars and get scripted series and movies there’s going to be 10 choices for that, and the movies are starting to be commoditized with the same movies are on each platform.
If you want something else, if you want to see golf or if you want to see natural history, that’s our bet. Our bet is that we’re completely different than the rest of the guys and we have superfans that have an affinity for our stuff. Our content costs about $400,000 to $500,000 an hour, scripted is anywhere from $5 million to $10 million, so it’s a lot more expensive and it’s getting even more expensive. We have a much more efficient model, so we could actually charge less (than Netflix).
In the US we have 18 channels, so we’re the second biggest TV company in America. When you look at our 18 channels the amount that we charge for those 18 channels is less than one regional sports network. So our costs are less but we can make a lot of money even if we charge less, so that’s one of the reasons why we’re on every skinny bundle. We have great channels but we’re also not that expensive.
The former CEO of Saks, Steve Sadove, says that what’s really fascinating is the convergence that is currently happening with online and brick and mortar stores. You have the Amazon’s of the world adding brick and mortar store options and then you have Walmart and Target and many others growing at 40-50 percent with their online sales.
Steve Sadove, former Saks CEO, discussed the online and physical store convergence on Fox Business:
Brick and Mortar Isn’t Dying
People buy for many reasons and a good part of it is the experience of shopping. About 80 percent plus of shopping is still done in a brick and mortar store. Brick and mortar isn’t dying, people want to touch and they want to feel. Just think about apparel. With apparel, my old company Saks was doing 30-35 percent of the product online but customers still want to touch and feel and meet with the associate and experience it.
What’s Fascinating is the Convergence of Online and Stores
What’s fascinating is this convergence of online and stores. The Amazon’s of the world are now opening up stores. Then you have the brick and mortar guys who are saying buy online and pick up in stores. Walmart is moving much more in the direction of being omnichannel, encouraging online shopping. Amazon is opening up stores. You have the pop-up stores, you have the Warby Parker’s who are online opening up stores.
The Good Retailer Provides the Experience Wherever They Want It
Then you have the brick and mortar people, Target growing 40-50 percent, Walmart growing 40-50 percent with their Internet business. It’s this convergence that really is what the consumer is valuing because they want to buy anytime, anywhere they want to get product. Some of them hate going into a store. Others just want to go into a store. The good retailer is going to provide that experience wherever they want it and they’re going to give them the value that they want.
Nike has created an amazing store in New York City that truly integrates the digital experience with physical retail. The worlds of physical and digital are not really separated for consumers the way we may have thought says Heidi O’Neil, the President Nike Direct. Clearly, brick and mortar retail is not dead, it’s just changing and Nike is showing the world how it can be done.
Heidi O’Neil, President of Nike Direct and Sean Madden, Senior Director of Product at Nike Direct were interviewed about Nike’s New NYC technologically enhanced flagship store by Katherine Schwab of Fast Company. You can watch the full video below:
Physical and Digital Together Create an Incredible Consumer Experience
“It’s interesting with all of the medium crests around the death of retail, what we found, at least with our Nike consumers, is over 80 percent of consumers actually want a physical experience as part of their shopping experience,” says Heidi O’Neil, President of Nike Direct. “The worlds of physical and digital are not really separated for consumers the way we may have thought about it when we were thinking about the death of retail. In fact, they can really support each other to make an incredible consumer experience.”
Get Every Item on a Mannequin Head-To-Toe Digitally
“When you come in you’ll be welcome to Nike New York,” explained Sean Madden, Senior Director of Product, Nike Direct. “On the smartphone screen is what we call Retail Home. We found based on a lot of research that consumers really love mannequins, but they get really frustrated when they can’t find the product that’s on the mannequin. Is it in your size? Is it in your color?
“We’ve built a system where the consumer can simply scan a QR code and they’ll get every item that a mannequin is dressed in from head-to-toe digitally,” said Madden. “We’ve also enabled consumers to build a virtual Try-On List. They can then choose their size and have it sent right to their fitting room.”
Smart Fitting Rooms Offer Lighting Options
“Not only will the product will be waiting for you in the fitting room we’ve also introduced the ability for you to customize the look with lighting so you can see how the product looks on you and will perform in different lighting conditions,” he said. “We want consumers to understand how the product will look in different conditions, especially the New Yorker who is going from their house to sport to work to life and they want a product that can flex with them. They also take a lot of selfies in fitting rooms so good light and an interesting room really helps with that.”
Data Powers the New Nike Speed Shop
“We use data to inform the assortment with New Yorkers favorites in the Speed Shop,” said O’Neil. “Then what we’re also able to do from a data perspective is we’re able to take all the selling information and all the data from what’s happening in the five other floors of the store to have a trendy now experience in the Speed Shop. So as a New Yorker you don’t have to spend half the day here, a couple hours there, you can just go and say I’m getting the absolute best of this store curated for me and refreshed in the day, in the hour.”
The Head of Policy at Airbnb, Chris Lehane, says that they are seeing the same underlying dynamics and trends of millennials driving Airbnb growth in China that they saw earlier globally. With 400 million millennials living in China, the growth potential for Airbnb is massive. He noted that millennials will be 75 percent of consumers going forward and home sharing is how they like to travel.
Chris Lehane, Head of Global Policy And Communications for Airbnb, talked about the huge growth of the company and their massive potential for even more growth driven by millennials in China and around the world in an interview on Bloomberg:
Airbnb’s Single Biggest Quarter Ever
As we released on Friday, we are significantly over a billion dollars in revenue in Q3, our single biggest quarter ever. We are blessed ultimately by this really significant and robust growth. Ultimately that’s tracking to the community model that exists on Airbnb. We only do well if our hosts do well, hosts do well if our guests do well, guests do well only if communities are benefitting. That flywheel does create a network effect globally. You can see that underneath these growth numbers, 91 percent growth in Bejing. Over 79 percent growth in places like Mexico City or even Birmingham, England.
Home Sharing is How Millennials Like to Travel
Ultimately what’s really underlying the foundation for all of that is that people are looking for this type of travel. More people are going to be able to do home sharing type of travel, people to people travel tomorrow than today. This is not new, Abraham Lincoln, Gandhi, they did home sharing, but in particular, this is what consumers are looking for, particularly millennial consumers who are going to be 75 percent plus of all consumers going forward. This is how they like to travel.
400 Million Millennials in China – A Huge Opportunity for Airbnb
Looking at our global numbers, what we are seeing in China really does reflect the same thing that we are seeing globally. We are blessed with this growth which is being driven by that network effect that exists locally. What we are seeing in China is really interesting. It has the same underlying dynamics and trends that we saw with the business earlier.
When Airbnb was first launched the majority of users were millennials. If you look at our China market right now about 85 percent of our consumers are millennials. It’s a similar trend, but keeping in mind that there are 400 million millennials in China. We are really the significant player in what’s called the outbound travel, people going from China abroad. What’s happening is they come back and then they begin to travel domestically and Airbnb begins to grow as a result of that.
China is a place you have to get up every day and work incredibly hard. We do have a president of the business who is from China based on the ground there. We have an incredible team made up of Chinese folks who are on the ground there in Bejing and other offices around the country. I feel good about where we are but I know that we need to keep working at it.
