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  • Kroger CEO: Digital Business Is Up 127 Percent

    Kroger CEO: Digital Business Is Up 127 Percent

    “Our digital business is up 127 percent,” says Kroger CEO Rodney McMullen. “When you look at what our customers tell us and one of the reasons why our digital business is so strong is things that are personalized. We continue to look at what the customer wants and needs and then how do we serve those. What we find are our store teams, our pickup associates, and delivery is very important.”

    “Customers are at the center of everything we do and, as a result, we are growing market share,” noted McMullen in their earnings release. “Kroger’s strong digital business is a key contributor to this growth, as the investments made to expand our digital ecosystem are resonating with customers. Our results continue to show that Kroger is a trusted brand and our customers choose to shop with us because they value the product quality and freshness, convenience, and digital offerings that we provide.”

    Rodney McMullen, CEO of Kroger, discusses how their digital business has been particularly key to powering their massive growth amid the COVID pandemic:

    Digital Business Is Up 127 Percent

    Customers are continuing to shop in our stores. When they shop in our stores, the count is down but the amount they spend per visit is up significantly. Also, our digital business is up 127 percent. Customers continue to engage in that. What we’re finding is that in markets where COVID is having a lower incident rate or where it is having a higher incident rate, it really doesn’t have that much of a difference. The thing that’s exciting is that people are finding they enjoy cooking and they enjoy eating as a family. It’s really all those things together that gave us the confidence to go out with the (earnings) guidance that we did.

    We’re really looking at this for the long term, what’s right for the customer today and what’s right for the customer two or three years out. The increased volume has allowed us to leverage some costs. What we’re doing is taking some of that and sharing it with the customer by waiving our pickup fee. Also, we’ve continued to do promotions throughout the pandemic and we continue to share some of that with the customer. We really do fundamentally just believe the customers will reward us once we get out of the pandemic as well. It’s just the right thing to do and it’s the right thing to do to help a customer’s budget go a little further.

    Digital Business Is Strong Because Of Personalization

    For us, it’s the whole total experience. When you look at what our customers tell us and one of the reasons why our digital business is so strong is things that are personalized. We also do incredibly well on fresh. Customers tell us and they expect that our fresh is really good and good relative to our competition. It’s really all of those things together. We’ve had a membership program for a long time and you didn’t have to pay for it. It’s fuel rewards and we do loyal customer mailings and all those things.

    We continue to look at what the customer wants and needs and then how do we serve those. What we find are our store teams, our pickup associates, and delivery is very important. We are making sure we have that total balance of the experience both from a people standpoint, a price standpoint promotion, and then kind of sealing the deal with fresh products as well.

    Digital Business Is Up 127 Percent Says Kroger CEO Rodney McMullen
  • Get Ready For Amazon Prime Drone Deliveries

    Get Ready For Amazon Prime Drone Deliveries

    Amazon’s plans to use autonomous drones for package delivery took a big step forward with FAA approval to begin testing.

    Amazon Prime Air has been working toward the use of drones to deliver packages to consumers in 30 minutes or less. According to Reuters, the FAA just approved the company to begin testing of its autonomous drones, joining UPS and Alphabet’s Wing division.

    The drone service could represent a big cost savings to Amazon, while giving the company a competitive advantage, in terms of the speed of delivery. At the same time, there are still a number of challenges to address. As more people rely on online shopping, porch piracy has become a major issue. It’s a safe bet there will be an equally big problem with ‘package poaching’ as Amazon’s drones take to the sky.

    Either way, the FAA’s approval to begin testing is an important step in widespread adoption of drone deliveries.

  • Walmart Joining Microsoft in Effort to Purchase TikTok

    Walmart Joining Microsoft in Effort to Purchase TikTok

    Walmart is getting in on the TikTok action, joining Microsoft’s bid to purchase the beleaguered social media platform.

    TikTok has gone from one privacy and security scandal to the next, culminating in the Trump administration instituting a ban that will go into effect on September 15, unless a buyer can be found. Microsoft has emerged as a frontrunner, although Oracle has also expressed interest.

    Now it appears that Walmart is joining Microsoft in its bid, seeing a unique e-commerce opportunity.

    “The way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets,” reads the company’s statement. “We believe a potential relationship with TikTok U.S. in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses. We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators.”

    It will be interesting to see what Microsoft and Walmart can make of TikTok, should a sale be successful.

  • Etsy CEO: Anti-Competitive Act By Amazon To Consolidate Market Power

    Etsy CEO: Anti-Competitive Act By Amazon To Consolidate Market Power

    “Amazon then has turned around and supported a bill in California to say that every other online marketplace that’s not acting like a retailer (as Amazon is) should be held strictly liable,” says Etsy CEO Josh Silverman. “So Craigslist or eBay or Etsy should have liability. This is going to have tremendous consequences for the 3 million sellers on Etsy and for all sorts of small businesses all around the country should Amazon prevail in this fight. It’s really an anti-competitive act from amazon to consolidate their market power.”

    Josh Silverman, CEO of Etsy, discusses how Amazon is using its financial power to cynically support legislation it was previously against for the sole purpose of crushing smaller competitors such as Etsy:

    Wolf In Sheep’s Clothing To Protect Amazon’s Market Power

    I think this is an important issue and it’s important for everyone in America. This is a wolf in sheep’s clothing designed to protect Amazon’s market power and extend Amazon’s market power. It’s dressed up to look like consumer protection.

    Here’s what’s going on. Consumers, of course, need to be protected if something goes wrong with a purchase. There’s a long history of law that says if you buy something from a retailer and something goes wrong that retailer is strictly liable. It also says if you buy something on a marketplace the vendor on the marketplace is liable but the marketplace itself is not. Think if you buy something from a flea market, the landlord who owns the parking lot is not liable, it’s the person you bought it from at the flea market.

    Tremendous Consequences For Etsy Should Amazon Prevail

    So the question, and there’s been a gap in recent law, what happens when a marketplace starts to look and act like a retailer? We don’t need California to come and pass a law on that because the California judiciary just settled that issue last week. They said Amazon looks like a duck and smells like a duck so it acts like a retailer. It exerts control, it picks the inventory, it stores the inventory in its warehouses, it pick-packs and ships the inventory, it puts it in an Amazon box and it delivers the box to your door in an Amazon van. It said Amazon meets the standard of acting like a retailer and therefore it should be liable like a retailer.

    Amazon then has turned around and supported the bill in California to say, well then every other online marketplace that’s not acting like a retailer should be held strictly liable. So Craigslist or eBay or Etsy should have liability. This is going to have tremendous consequences for the 3 million sellers on Etsy and for all sorts of small businesses all around the country should Amazon prevail in this fight.

    Anti-Competitive Act By Amazon To Consolidate Market Power

    Amazon has previously been fighting these kinds of bills for years. It’s so cynical. They lost this court case because the court found that they act like a retailer. So they’re now strictly liable in the cases where they act like a retailer. The court didn’t find that they do it every time. The court set a standard for what are the tripping points. They gave guidance for other courts on when is a marketplace actually acting so much like a retailer that they should be held strictly liable. Amazon would trip that wire most of the time.

    Amazon then flipped and said well this is an inconvenience for us but it would be a crushing burden for small businesses, for our competitors, for people like Craigslist or Etsy. They’ve now backed a law saying since we have to do this because we act like a retailer we want all online marketplaces to also be held liable even if they don’t act like a retailer. The reason is that this is so complex that a smaller place, a marketplace like Etsy, which never touches the merchandise, which doesn’t fulfill, which doesn’t pick pack and ship, simply can’t comply. It’s really an anti-competitive act from amazon to consolidate their market power.

    Etsy CEO Josh Silverman: Anti-Competitive Act By Amazon To Consolidate Market Power
  • FreshDirect CEO: Seismic Shift In How People Want To Buy Food

    FreshDirect CEO: Seismic Shift In How People Want To Buy Food

    “It’s a remarkable time in that we’re witnessing the beginning of a seismic shift in terms of consumer preference in how they want to buy their food,” says FreshDirect CEO David McInerney. “What we’ve seen is within the cities that we operate, New York, Philadelphia, DC, we’ve seen the urban dwellers migrate out to the suburbs. As they migrate out they are taking FreshDirect with them.”

    David McInerney, CEO, and co-founder of FreshDirect, discusses how the pandemic has caused a boom in how people want to buy their food:

    Witnessing Seismic Shift In How Consumers Want To Buy Food

    Overall, the growth continues to be tremendous both in the cities and in the suburbs. It’s a remarkable time in that we’re witnessing the beginning of a seismic shift in terms of consumer preference in how they want to buy their food. What we’ve seen is within the cities that we operate, New York, Philadelphia, DC, we’ve seen the urban dwellers migrate out to the suburbs. As they migrate out they are taking FreshDirect with them.

    When you combine that with this iconic truck that we have that everybody knows and then new customers in the suburbs see it and word of mouth goes on. Then all of a sudden we are seeing really explosive growth there as well. Frankly, it’s something that we like a lot. We like the suburban customer because they have really big pantries. They really value fresh food. We’ve had a good time with it thus.

    Customers Moved To Suburbs But They Are Coming Back Soon

    We’re sort of on the sidelines watching (when people will go back to urban areas again). We are talking to a lot of our customers. The truth is we are hearing from some that they plan on staying wherever they are, whether that’s in a suburb in our trading area or somewhere else in the country. But I think there are a fair amount that are coming back and we’re planning as such. We’re planning to see a significant migration back in September for all three cities.

    While the ramp-up will probably not be as strong as we’ve seen in earlier years we’re still expecting growth. There’s also a big chunk of our business which is in the offices. We do a corporate office business as well and that has been pretty much non-existent. We think that will take more time to ramp up but we see that coming back to some extent in September as well.

    FreshDirect CEO David McInerney: Seismic Shift In How People Want To Buy Food
  • Ultimate Solution For Uber and Lyft Is Autonomy

    Ultimate Solution For Uber and Lyft Is Autonomy

    “The ultimate solution for Uber and Lyft is autonomy,” says Loup Ventures Managing Partner Gene Munster. “If this employee model simply doesn’t work you are going to see these companies push even harder into autonomous systems simply eliminating the drivers. However, this will attract more competition. I think the two best companies positioned within that would be Google and their Waymo initiatives and also Tesla and how they are going to vector into the ridesharing market.”

    Gene Munster, Managing Partner at Loup Ventures, discusses how California in forcing drivers to be employees may ultimately speed up the efforts of Uber and Lyft to go fully self-driving and thereby simply eliminate all human drivers:

    What Would The Drivers Want?

    Both Uber and Lyft are in a tight spot. There was reprieve today. But this topic is not over with this vote coming November 3rd and California’s influence that they can have with other states. If you put all of this together and think about if these changes to employees across the country, it could be a 15 percent increase (in costs). This is effectively their profit margins.

    I do want to caution the voters of California and also some of the lawmakers on one aspect. What would the drivers want? Most of these drivers use both apps, both Lyft and Uber. If they are employees they likely will be restricted from jumping from app to app. That would cut down some of their rides and cut down what they will be paid on an hourly basis. I don’t think that the right path here is as clear for the drivers in simply becoming an employee.

    Ultimate Solution For Uber and Lyft Is Autonomy

    The ultimate solution for Uber and Lyft is autonomy. If this employee model simply doesn’t work you are going to see these companies push even harder into autonomous systems simply eliminating the drivers. One of the unique things about Lyft and Uber is it is a two-sided marketplace. They have drivers and riders. In an autonomous world you don’t need drivers. Essentially, that would leave Lyft and Uber with their key asset, their brands around movement. I think that is an asset but I don’t know if it is worth $55 billion.

    What I really take away from this is that over the next few years there are going to be ups and downs related to this regulation. Longer term, we know where this is going. Cars should be autonomous for safety reasons and productivity reasons. Ultimately, ridesharing with Uber and Lyft is going to be fully self-driving. This topic we are discussing today is going to be largely irrelevant.

    Lyft is already testing self-driving rides in Las Vegas

    Google and Tesla Will Compete With Uber and Lyft

    There are some key nuances to an autonomous ridesharing business model. As I mentioned, there is a two-sided marketplace. That’s really what makes Lyft and Uber special today. One of the sides of the marketplace, the drivers side of this, is under some pressure right now. But if we eliminate the drivers side then you don’t even have a marketplace. You are just trying to get consumers to ride. That opens up new competitors. There are about six of them that are trying to get there.

    The autonomy option is a better option for Lyft and Uber than what they currently have with humans driving. For an investor it’s a more profitable option. However, ultimately it will attract more competition. I think the two best companies positioned within that would be Google and their Waymo initiatives and also Tesla and how they are going to vector into the ridesharing market.

    I Would Put My Money On Lyft

    Assuming their ballot initiative wins in November, I’m in the Lyft camp. This is partly because I like their focus just on the US and on ridesharing. I think that the Uber Eats business, while its had a tremendous tailwind, it will get progressively more competitive and it’s tougher to make money in that business.

    Ultimately, if I had my choice I would put my money on Lyft. There is another X factor here. There is something subtle about Lyft’s culture. It is a more investor friendly culture and that influences my view.

    Ultimate Solution For Uber and Lyft Is Autonomy, Says Loup Ventures Managing Partner Gene Munster
  • Walmart CEO: We Had To Become More Digital

    Walmart CEO: We Had To Become More Digital

    “We had to learn to work in different ways to become more digital and to put data to work in different ways,” says Walmart CEO Doug McMillon as he reflected on the release of their blowout financial results. “Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away.”

    Doug McMillon, CEO of Walmart, discusses how the company has changed to become more digital over the last couple of quarters in response to the pandemic:

    Ecommerce Was Very Strong

    I would like to say thank you to all of our associates around the world and here in the US. They did a great job. You can imagine how challenging it is in this environment to go to work everyday and serve customers and keep the supply chain moving. Whether it’s in our stores, our Sam’s Club’s, or our distribution centers they have done a great job.

    Customers have been responding in waves as we’ve gone through the first and second quarters. Not surprisingly, they got really focused on things they needed to stock up to be at home for a long time at first. Over time, as we got through the second quarter and stimulus checks came in to play and people were at home, we certainly saw them buy things like laptops and tablets and fishing equipment and bicycles. Things that were related to home decor as they were at home thinking about their environment inside and outside the house we certainly saw them respond with what they were buying. Ecommerce, in particular, was very strong.

    Technology Phenomena Happening Around the World

    I’ve been in retail for almost 30 years and it’s really exciting when so many things can be done using technology. We can save customers time and expose them to so much more choice than we could previously. Our ecommerce assortments are broader as retailers and that’s certainly true at Walmart. We sell first-party owned inventory as well as through our marketplace. Now they can pick up their phone or be at home and open up their laptop and shop in so many different ways and have access to so many different things. It’s a lot of fun to be able to try and serve them in that way. That phenomena is happening around the world.

    You can use your app to do pickup and our stores. You can use your app to have the product brought straight to your house. Obviously, you can come in the store and we are learning how to use technology inside the stores in different ways to save you time. It boils down to access to assortment and an ease of shopping here in the US and around the world that people haven’t experienced before. That’s happening in Mexico, Canada, China, India, and all over the world.

    We Had To Become More Digital

    There have been a lot of changes inside the company. We had to learn to work in different ways to become more digital and to put data to work in different ways. Basically, to create a seamless experience for customers. We don’t want them to sense any difference as it relates to our brand whether they are shopping inside a store, picking it up, or having it delivered. All of those differences and channels that we might have thought about in the past need to be erased and taken away. Our teams have been doing a great job doing that.

    The outcome of that is this ease of shopping that’s unique and different. In our case, we’ve got so many stores so close to customers around the country it gives us a big advantage especially in being able to deliver quickly. We’ve got an express delivery system here in the United States that commits to delivering orders from our stores in less than two hours. That’s now in more than 2,000 stores and coming to stores all over the country. We are actually delivering a lot faster than two hours so far. That’s a great experience.

    We believe that this is something that we can build on along with having great stores where you want to come in from time to time, stock up, and experience what’s new. Really, we think that this omni world of retail is what will end up being the winning strategy over time.

    Scale Can Sometimes Be A Disadvantage

    Scale can sometimes be an advantage and sometimes it’s a disadvantage. Speed also matters a lot. Creativity matters a lot. What I’m proud of is how our team is responding to create new solutions for customers. Ultimately, whether Walmart grows or not is all up to them. We are serving families, moms and dads, and customers that have a lot of different choices. Even during the pandemic period with ecommerce and all the chains that were open there was still a lot of choice.

    We’ve got to compete to earn their business everyday and that’s the approach we take. Our team has really stepped up during this period and even before the pandemic to drive change and to create more solutions for customers.

    Walmart CEO Doug McMillon: We Had To Become More Digital
  • We Are Never Going To See A Return To The Old New York

    We Are Never Going To See A Return To The Old New York

    “I don’t think we are ever going to see a return to the old New York,” says New York resident and entrepreneur James Altucher. “Sixth Avenue is empty. Something like 30-50 percent of the restaurants in New York City are probably already out of business and they’re not coming back. The offices in Midtown where most of the millions of workers go to work in New York City, why are they empty?”

    James Altucher, author, podcaster, entrepreneur, and angel investor says that New York City is dead forever. Altucher discusses how the forced business closures have permanently altered how business is done making it unnecessary for employees to remain in this high cost and highly taxed city:

    Manhattan Offices May Remain Empty Permanently

    Sixth Avenue in Manhattan is empty. Something like 30-50 percent of the restaurants in New York City are probably already out of business and they’re not coming back. The offices in Midtown where most of the millions of workers go to work in New York City, why are they empty? They are allowed to be open but most companies now are encouraging workers to be remote. Citigroup, JPMorgan, Google, Twitter, and Facebook, they want employees to be remote for maybe years or even permanently.

    This completely damages not only the economic ecosystem of New York City, the restaurants, transportation, office buildings, and commercial real estate but what happens to your tax base when all of your workers can now live anywhere they want in the country? And not even just in the suburbs either. They are going to go to all of the cities like Nashville, Miami, Austin, and Denver. They are leaving the city because they can work in places that have a cheaper cost of living and a lower tax basis.

    What happens to the tax revenues of New York at the same time that deficits are soaring? All of these numbers and apocalyptic statistics what’s going to reverse that? It’s only going to get worse.

    We Are Never Going To See A Return To The Old New York

    I was born here and I’ve lived here for my whole adult life and I have five kids in New York City. But yes, I don’t think we are ever going to see a return to the old New York. The good news is that this means financial, creative, and artistic opportunities are going to be dispersed for the first time throughout the entire country now. It is not going to be isolated to just a few spots like New York, San Francisco, or L.A. Everybody is going to have opportunity.

    What makes this different is bandwidth is ten times faster now than it was in 2008. People really can work remotely now and have an increase in productivity.

    We Are Never Going To See A Return To The Old New York – James Altucher
  • Airbnb CEO: Every Crisis Should Lead To A New Point Of Innovation

    Airbnb CEO: Every Crisis Should Lead To A New Point Of Innovation

    “We said every single opportunity is a moment where we have to pivot and move fast,” says Airbnb CEO Brian Chesky. “What actually happened was, first of all, you have to have the mindset, a mindset of hope, of optimism, and of resiliency, that we’re going to get through this. And not only are we going to get through this but every one of these crises is going to lead to a new point of innovation. Let’s look for moments and a moment happened.”

    Brian Chesky, co-founder, and CEO, Airbnb, discussed with author and podcaster Simon Sinek how the pandemic crisis motivated the company to be more innovative:

    Every Crisis Should Lead To A New Point Of Innovation

    Andy Grove, one of the founders of Intel, said that bad companies are destroyed by a crisis, good companies survive a crisis, but great companies are defined by a crisis. I wanted us to be in that third bucket. So much of it is mindset. If you think you’re going to win, if you think that this is going to define you in a positive way and you’re going to learn something from it and it’s going to make you stronger, it kind of happens. So much of your mindset as the leader becomes the psychology of the organization and that psychology really becomes a collective consciousness. It becomes real. 

    So that was the thing. We said every single opportunity is a moment where we have to pivot and move fast. What actually happened was, first of all, you have to have the mindset, a mindset of hope, of optimism, and of resiliency, that we’re going to get through this. And not only are we going to get through this but every one of these crises is going to lead to a new point of innovation. Let’s look for moments and a moment happened. 

    In Just 14 Days We Pivoted The Entire Product Line

    With social distancing, we had to shut down in-person Airbnb Experiences. Airbnb is known for homes but we also have three-hour activities that you can book with people all over the world. They got paused. Suddenly, we started doing listening sessions with our hosts. It’s important, by the way, to listen and be curious. I don’t think it’s so much in life that you have to have ideas as much as it is to be a receiver for ideas. It’s not my job to have an idea and it’s not our job for any of us to have ideas. We need to be receivers. We’re like radio antennas, we just got to get on the right signal and people will tell you things. 

    People told us they wanted to host but since they can’t do it in person, can they offer them online? At first, I thought to myself, no you can’t offer them online. We’re about connections in the real world. Then, I thought, well if that’s the case there’s not going to be a lot of connections anytime soon. So we quickly realized that we should get in on this. So within 14 days, we pivoted the entire product line to offer online experiences. Now we have 800 experiences and 200 Olympians including Jackie Joyner-Kersee. They do these activities where you can actually go online and meet them and remotely be on an Experience with them.

    Preservation Mode Is A Very Dangerous Place To Be 

    I think so much of it was turning on a dime. I never wanted to just be focused on survival. If you focus on survival that’s probably all you’re going to get. All these other companies I saw were like just shuddering their businesses and just in defensive mode and preservation mode. I think preservation mode is a very dangerous place to be. The more resources the company accumulates the more they start worrying about losing things. It’s like a parent with an overactive amygdala putting the helmet on their child before they go outside because you’re worried something’s going to happen. They can never live their life. 

    It’s the same thing with a company. You have got to be concerned but not so concerned that you protect the company from itself and you’re afraid to do anything and you’re just preserving resources. Actually, that’s the worst possible thing ironically for shareholders. Shareholders need the company to grow. This weird obsession sometimes that some people have with serving shareholders is not actually in the shareholder’s best interest. They need companies to create value and therefore they need to be focused on doing new things people love. That’s what needs to happen to create value.

    Airbnb CEO Brian Chesky: Every Crisis Should Lead To A New Point Of Innovation
  • Apple Needs Fortnite More Than Fortnite Needs Apple

    Apple Needs Fortnite More Than Fortnite Needs Apple

    “Tim Sweeney, CEO of Epic Games, feels that Fortnite is large enough and scaled enough and that Apple needs Fortnite more than Fortnite needs Apple… and Google too for that matter,” says Alex Kruglov, CEO of pop.in. “Tim very intentionally wanted to get kicked out of the store. There is no other way to explain what they did so that they can make this very public and so they can have a lawsuit.”

    Alex Kruglov, CEO and co-Founder at pop.in, says that Apple and Google should reduce the 30 percent tax they charge developers for existing in their respective ecosystems:

    Apple and Google Must Reduce The Tax On Developers

    I definitely like the idea of challenging both the Apple store and the Google store in getting them to reduce the tax that they charge all of the developers. There are two potential issues here. Issue number one is that the tax is decided by Apple and Google and can be changed at any time. There is nothing that developers can do because there is no other place we can go to. There is no other way to get on the devices and a person usually has only one device.

    Secondly, kind of similar to TicketMaster in the 90s, when Pearl Jam went against them, they control the entire ecosystem. This includes the ability to advertise within your store to get your app downloaded. I love Apple’s clean well-lit ecosystem. I love what they’ve built. But if there is a bigger player who has leverage who can help the rest of us run more successful and profitable businesses I am all for it.

    Apple Needs Fortnite More Than Fortnite Needs Apple

    Tim Sweeney (CEO of Epic Games) is doing this very deliberatively. There is no question about it. If you follow Tim on Twitter or just in general, you know that he has been on this campaign for quite some time, since before they started their own ecosystem. Epic has its own store and they let developers opt-in to their fee system where they charge 12 percent.

    He feels that Fortnite is large enough and scaled enough and that Apple needs Fortnite more than Fortnite needs Apple… and Google too for that matter. Tim very intentionally wanted to get kicked out of the store. There is no other way to explain what they did so that they can make this very public and so they can have a lawsuit.

    Apple Under Pressure To Reduce App Store Fees

    Apple has been perceived as the good guy. Then on the other side with Google where with Facebook they are monopolistic given that they control essentially the entirety of the advertising system. So where do I think this ends up given the scrutiny that Apple is facing? I think that there is a very good chance that they will come back and reduce the fees and also opt-in to something firm as opposed to the set of rules that are all over the place.

    This is a pretty inexpensive way for both Apple and Google to say they are listening (to developers). We’ve heard the developers and we are going to do the right thing. I’m predicting this but this is definitely not what they have done over the last decade.

    Apple Needs Fortnite More Than Fortnite Needs Apple says Alex Kruglov, CEO of pop.in
  • Apple Will Eventually Fall Apart If It Doesn’t Back Down

    Apple Will Eventually Fall Apart If It Doesn’t Back Down

    “I think taking 30 percent from app developers is egregious,” says Alex Kantrowitz, publisher of the Big Technology newsletter. “It feels like protection money to me. As long as the company continues to rely on other people’s money to make its bottom line it’s going to turn slodgy, slow, bureaucratic, and I think it will eventually fall apart. Apple should back down because rent collecting is bad for its business long term.”

    Alex Kantrowitz, founder and publisher of Big Technology, believes that Apple should back down in its battle with developers like Epic Games because it is bad for their brand and could lead to epic failure for Apple in the long term:

    Epic Had Public Relations Campaign Ready To Go

    I don’t think it’s any accident that Epic went right after Apple’s brand which Apple has worked very hard to cultivate. Apple is a luxury product. What Epic is doing is trying to make this a battle for Apple where it says, do you want 30 percent of our revenue in the app store? Now you have to go from a company that everybody looks up to to a company that owns what it does, which is rent collects on the app store and takes 30 percent of our revenue.

    That’s why Epic has had this public relations campaign ready to go. It’s why it spoke about Apple’s history in the lawsuit. It’s why this was so planned, one move after the other, to show the public that this is actually what Apple is. If Apple is going to take our money they better own what they’re doing.

    Apple Taking 30 Percent From Developers Is Egregious

    What do developers get from the 30 percent that they pay Apple in terms of the revenue that they hand over to stay on the app store? They get the right to exist, that’s one thing. They get quick payments, that’s another. What else are they getting and is that amount of money actually worth it? Would they be paying anybody else that amount of money unless that other person had a monopoly?

    I don’t think it is worth it. I think 30 percent is egregious. It feels like protection money to me. Maybe we get somewhere in the 10 -15 percent range, that seems like the right amount for a developer to pay to Apple because Apple does provide some value. But the number right now is just totally out of whack and it exists because Apple has a monopoly on that store. It’s good that we are seeing somebody challenge what Apple’s doing.

    Apple Is The Only Show In Town For Developers

    Apple is basically the only show in town. If you don’t like what’s going on inside Walmart you go to your neighborhood store. If you don’t like what’s going inside the Apple app store where are you going to go? Maybe you can go to Google but Google is doing the same exact thing. I do think that Apple should definitely charge developers for what they’re getting.

    The question is do developers have any wiggle room so that they can have an opportunity to negotiate with a company like Apple? What Epic is showing is that is not really the case. This is how markets (should) work. You want to have the ability for the supplier and the demander to figure out a price that makes sense versus the supplier just setting the price and your sort of out of the market otherwise.

    Apple Will Eventually Fall Apart If It Doesn’t Back Down

    Apple should back down because rent collecting is bad for its business long term. You have to decide as a business, do you want to make your money milking your asset or do you want to make your money innovating into the future? Right now Apple has decided that it wants to be a rent collector. It’s worked out fine under Tim Cook, I won’t deny that. If you think about Apples’ long term sustainability does it want to build a culture where it’s business is taking a fee off of other people’s businesses or does it want to force itself to invent its way into the future?

    If I’m Apple I’m thinking long term. I want to have a more inventive culture, not a more asset milking culture. As long as the company continues to rely on other people’s money to make its bottom line it’s going to turn slodgy, slow, bureaucratic, and I think it will eventually fall apart. If I’m Apple, the case right here is to back down and think about where I’m going in the long term and it should be in an inventive way and not a rent seeking way.

    Alex Kantrowitz of Big Technology: Apple Will Eventually Fall Apart If It Doesn’t Back Down
  • Amazon Is Responsible For Defective Third-Party Products

    Amazon Is Responsible For Defective Third-Party Products

    A court has ruled Amazon is liable for defective products, including those sold by third-party sellers.

    To date, Amazon has managed to avoid being held liable for defective products sold by third parties in its Marketplace. A California Court of Appeals ruling changes that, however, reversing a previous decision by a San Diego Superior Court.

    The case centers on a woman who purchased a replacement laptop battery that later exploded, injuring her. Amazon has argued it is merely a service provider, and therefore shouldn’t be held liable. In her ruling, Justice Patricia Guerrero said Amazon’s involvement went far beyond that of a service provider.

    “As a factual and legal matter, Amazon placed itself between Lenoge and Bolger in the chain of distribution of the product at issue here. Amazon accepted possession of the product from Lenoge, stored it in an Amazon warehouse, attracted Bolger to the Amazon website, provided her with a product listing for Lenoge’s product, received her payment for the product, and shipped the product in Amazon packaging to her. Amazon set the terms of its relationship with Lenoge, controlled the conditions of Lenoge’s offer for sale on Amazon, limited Lenoge’s access to Amazon’s customer information, forced Lenoge to communicate with customers through Amazon, and demanded indemnification as well as substantial fees on each purchase. Whatever term we use to describe Amazon’s role, be it ‘retailer,’ ‘distributor,’ or merely ‘facilitator,’ it was pivotal in bringing the product here to the consumer.”

    This ruling will likely have profound implications on Amazon’s business, although what those are remains to be seen.

  • PayPal CEO: Across Every Industry, We’re Seeing a Surge Towards a Digital-First Strategy

    PayPal CEO: Across Every Industry, We’re Seeing a Surge Towards a Digital-First Strategy

    “It was a strong quarter for us certainly across almost every metric,” says PayPal CEO Dan Schulman. “What’s happened is the world has accelerated from physical to digital across almost every industry. If you look at health care it’s all about telemedicine right now. If you look at education it’s about remote learning. If you look at the retail industry it is now about online almost over offline or physical locations in store. If you look at the restaurant business you really can’t be in business.”

    Schulman says that it is imperative for businesses to move toward a digital-first strategy. “If all you’re doing is trying to serve customers at your location given social distancing and the number of people coming out (you won’t survive),” he said. “You have to be about takeout and delivery. Across every industry, we’re seeing this surge towards a digital-first strategy. All of the tools and products and services that we offer are probably more relevant and important across multiple industries than they’ve ever been before.”

    PayPal CEO: Across Every Industry, We’re Seeing a Surge Towards a Digital-First Strategy
  • Uber CEO: Will Shut Down In California Until Voters Decide

    Uber CEO: Will Shut Down In California Until Voters Decide

    • We will have to essentially shut down Uber until the voters decide.
    • Reclassifying drivers from contractors to employees is unfortunate.
    • You would just get a much smaller service at much higher prices.
    • The vast majority of our drivers don’t want to be full-time workers.
    • Really unfortunate at a historical time of unemployment in California.
    • It would put vast swaths of our drivers out of work.
    • It would take away transportation from hundreds of thousands of Californians.
    • Our labor laws are hopelessly outdated.
    • It’s essentially how Uber started, kind of a black car service with few cars. 
    • We can’t go out and hire ten of thousands of people directly overnight.
    • We would focus on the center of cities versus smaller cities or suburbs.

    “We think the ruling by a California judge was unfortunate on reclassifying drivers from contractors to employees,” says Uber CEO Dara Khosrowshahi. “We think we (already) comply with the laws. But if the judge and a court finds that we are not and they don’t give us a stay to get to November then we will have to essentially shut down Uber until the voters decide.” 

    Dara Khosrowshahi, CEO of Uber, discusses a court ruling requiring Uber to classify Uber drivers as full-time workers. Khosrowshahi says that this will force Uber to become a much small black car service focused on city centers and with much higher prices for rides. Essentially the service would no longer exist in California suburbs and rural areas:

    Vast Majority of Uber Drivers Want To Remain As Contractors

    We think the ruling (in California) was unfortunate (on reclassifying drivers from contractors to employees). We obviously respect the law and the judge. We do have about eight days now where there is a stay. We are going to go back to the court and appeal the ruling and hope that the court reconsiders. If the court doesn’t reconsider then in California, it’s hard to believe we will be able to switch our model to full-time employment quickly, so I think Uber will shut down for a while. Really, the big question is in November with Prop. 22, we have a proposition out there that puts forward what we believe is the best of both worlds. 

    The vast majority of our drivers, a 4-1 ratio, want flexibility, and don’t want to be full-time workers. With Prop. 22 drivers can continue to have the flexibility that they have but they can enjoy the protections, benefit fund, an earning standard so that they have the protections that many people associate with full-time work. We are hoping that in November the California voters can speak. We are confident that this better way which is kind of the best of both worlds will be the way going forward for California.

    We Will Shut Down Until The Voters Decide In November

    In California, we have changed our model substantially. For example, riders in California pay drivers directly. Drivers can set their own price as an independent contractor would. Drivers have all the flexibility to decide whether or not they want to take a ride or not. We think we (already) comply with the laws. But if the judge and a court finds that we are not and they don’t give us a stay to get to November then we will have to essentially shut down Uber until the voters decide. 

    It would be really unfortunate at a historical time of unemployment in California. It would put vast swaths of our drivers out of work without the opportunity to earn. It would take away transportation from hundreds of thousands of Californians. It would be really really unfortunate. Obviously we would look to comply with the law long-term and we’re hoping the law gives us the best of both worlds. Our labor laws are hopelessly outdated. You’ve got the haves and have-nots and you can have actually a better way.

    Smaller Service, Higher Prices, Only Focused On Big City Centers

    Hopefully, the courts will reconsider. By no means do we want this to happen. If they don’t we are going to have to work to move to a full-time model. It’s essentially how Uber started, kind of a black car service with very few cars on the road and much higher prices. So we will look to flip to a full-time model but this is a model that we built over ten years. We can’t go out and hire ten of thousands of people directly overnight. It would take a significant amount of time to switch over. We have teams thinking about it and working on it. We don’t think it’s the likely outcome by the way and we would look to get back on the road as quickly as possible. 

    You would just get a much smaller service, much higher prices, and probably a service that’s focused on the center of cities versus a bunch of the smaller cities or the suburbs that we operate in right now. That’s the reality. It’s not a game of chicken or one way or the other. It’s really up to the courts and we are going to comply with the law. We will look to get going but it will be a very very different service once we get going.

    Uber CEO: Will Shut Down In California Until Voters Decide
  • OpenTable CEO: One In Four Restaurants Closing Is Conservative

    OpenTable CEO: One In Four Restaurants Closing Is Conservative

    “We expect around one in four restaurants to close and to not be able to return because of COVID,” says OpenTable CEO Debby Soo. “Unfortunately, now we think that number might even be conservative. Restaurants are going through a grueling time right now. We don’t know when it is going to come back to pre-COVID levels but it is likely to be after there is a vaccine available for people to take.”

    Debby Soo, CEO of OpenTable, discusses the ramifications of COVID and the related government mandates and restrictions on the restaurant industry:

    One In Four Restaurants Closing Now Appears To Be Conservative

    We expect around one in four restaurants to close and to not be able to return because of COVID (related mandates). Unfortunately, now we think that number might even be conservative. Restaurants are going through a grueling time right now. They are having to pay for their wait staff and rent is a huge cost. For restaurants to open back up any type of government aid that can be given to them would be amazing and is necessary. But also again, people have to feel comfortable being in an enclosed area and feeling safe to be around other people. With a lot of the restaurants space is a constraint. 

    We are thinking (about what’s going to happen in the winter when people will want to go into restaurants). It’s very much top of mind for restaurants who are right now experiencing a great surge in demand because it’s summer and dining out is so popular and prevalent. I imagine that takeout and delivery will continue to gain share, especially in the colder months. People now are much more willing to order food and get it delivered or to go and pick it up. That will be one of the main lifelines for restaurants during the colder months.

    Vaccine Needed For Dining To Come All The Way Back

    For dining to return all the way back to pre-COVID levels, a vaccine will be needed. However, we do see dining demand starting to pop up. We recently ran a survey at OpenTable and 25 percent of our respondents said they were dining out at least once a week. That demand is definitely there. Of course, safety precautions are very top of mind for both our restaurants and diners. They want to make sure that the restaurants are keeping both their employees and patrons safe with mask-wearing, table spacing, and all of that. 

    We don’t know when it is going to come back to pre-COVID levels but it is likely to be after there is a vaccine available for people to take. However, we are seeing signs of life and we know that diner demand is there. People are itching to get out and eat.

    Launched Myriad Of Features In Response To COVID

    We’ve recently launched a myriad of different features to adapt to the quickly changing environment around us. We launched Takeout which for diners is a really convenient way to browse a restaurant’s menu, order a meal, and pay all from your OpenTable app. For restaurants, it’s great because it is an additional revenue stream. We also released a new feature we call Safety Precautions. When you come to OpenTable for each restaurant that you are looking at going to you can see a list of all the specific safety and health initiatives that restaurants are following to keep their diners and staff safe. 

    We also recently launched Experiences. This can be anything from a happy hour to a prix fixe menu or a chef’s table. We are seeing a lot of demand for this, even now when people are still not completely comfortable going out to eat. There is this hunger and need for special occasions and these types of experiences.

    OpenTable CEO Debby Soo: One In Four Restaurants Closing Is Conservative
  • Ecommerce Is Growing Much More Rapidly Than Before

    Ecommerce Is Growing Much More Rapidly Than Before

    “Demand for space is actually increasing because ecommerce is growing much more rapidly than it was before,” says global logistics real estate company Prologis CEO Hamid Moghadam. “We probably got three, four, or five years of growth in a quarter or two. Ecommerce is a big tailwind for our business. It’s a pretty good business otherwise but ecommerce just supercharges it.”

    Hamid Moghadam, chairman, and CEO of Prologis, the global leader in logistics real estate, while discussing their earnings release says the pandemic has rapidly accelerated the growth of ecommerce worldwide: 

    Ecommerce Is Growing Much More Rapidly Than Before

    We started the year with a very optimistic outlook and of course, all of that was before COVID. When we got to the first-quarter results, they were strong, but we softened our outlook a bit because nobody really knew what we were facing. As the business has progressed in the second quarter we’re finding that demand for space is actually increasing because ecommerce is growing much more rapidly than it was before. 

    We probably got three, four, or five years of growth in a quarter or two. Ecommerce is a big tailwind for our business. It’s a pretty good business otherwise but ecommerce just supercharges it. 

    Our Business Is Vital To The Supply Chain

    We run a global business. If you look at our collections globally, the US is actually stronger than the global numbers. But if you look at the overall numbers they are actually running better than last year which was a record year. You might ask why in an environment like this that collections are running ahead of last year? The reason is pretty simple. Our business is vital to the supply chain. Even people whose businesses are not doing well have to keep their inventory somewhere and that’s usually in one of our buildings. 

    An interesting statistic is that 2.5 percent of global GDP goes through our billion square feet around the world. We’ve got pretty good visibility as to what’s going on in the global economy. Both on the good end and the soft end people need inventory and a place to store their goods.

    Houston Is The Softest Market In The US

    Houston is probably the softest market in the US. Globally, I would have to say France is probably one of the weaker markets. But generally, through this cycle, we’ve held up pretty well around the world. The primary reason is that unlike other cycles supply of space was very tight going into this downturn. Vacancies were under five percent and utilization rates were in the mid-80s. Both of those are records.

    I’ve been doing this for about 37 years and those are numbers that are unprecedented in our business. Unprecedented good.

    Ecommerce Is Growing Much More Rapidly Than Before, Says Prologis CEO Hamid Moghadam
  • eBay Sells Classifieds Business For Nearly $9 Billion

    eBay Sells Classifieds Business For Nearly $9 Billion

    eBay has streamlined its focus and reached a deal to sell its classifieds business for nearly $9 billion.

    In addition to its traditional business, eBay has a Craigslist-style classifieds business in approximately 1,000 cities around the world. eBay has been looking to sell that portion of the business for some time.

    According to Reuters, Norwegian firm Adevinta has won the auction for the classified business, which includes Gumtree and Kijiji, agreeing to pay almost $9 billion. eBay will still maintain a minority stake in the business. Adevinta already maintains online marketplaces in some 15 countries, and will double in size as a result of the deal.

    Given how popular online shopping has become as a result of the pandemic, eBay could not have chosen a better time make this deal.

  • Doordash COO: Bringing The Entire Walgreens Store To Your Door

    Doordash COO: Bringing The Entire Walgreens Store To Your Door

    Doordash has announced that they have partnered with Walgreens to ultimately bring the entire Walgreens store to the door of 100 million Americans.

    Doordash COO Christopher Payne discusses their new Walgreens delivery collaboration and explains how this deal is part of their customer-centric focus which has driven the company’s growth from its founding:

    We Are Bringing The Entire Walgreens Store To Your Door

    Our new partnership with Walgreens is going to be fabulous. We have 2,300 items that will be available to the Doordash customer base. We cover about 100 million Americans. This will bring for the first time Walgreens products in over the counter medicine, grocery, and household items and other categories that are totally appropriate for this COVID crisis that we are in.

    While we are starting with 2,300 items we are going to rapidly grow that to 5,000 items, essentially bring the entire Walgreens store to your door on demand. That’s the key thing.

    With COVID We Shifted Into Going Beyond Restaurants

    One of the things we did with COVID is we shifted into going beyond restaurants and focused on empowering local economies by bringing other things that people want to be delivered into their home. Walgreens is a perfect example of that. We are going to ramp up to cover all of their stores over the coming months.

    That will touch 100 million Americans. That’s a huge announcement today and we are thrilled to be in a collaboration with Walgreens.

    Core To Us Is Listening To Our Customers

    One thing that is true of this space is that it has been competitive since day one. What sets Doordash apart is we are not focused on our competitors. We have been focused on our customers. That is one of the core values of Doordash and is one of the key reasons we have a market share lead in food delivery in the United States. We are going to continue to focus on that. Core to us is listening to our customers and being merchant first.

    Our original vision was to empower local economies. The idea is that we want to connect every local business to every local consumer. That’s a very different strategy than just broad ecommerce. That is making these businesses successful that are around you and me. That’s what sets Doordash apart and what will continue to set Doordash apart.

    We Are In The Early Days Of This Category

    We are in the early days of this category. We are not focused on what our competitors are doing. That is the right strategy for us. However, we won’t rule out potential acquisitions. We did a Caviar acquisition last last year that has gone incredibly well. Our focus has been on helping our merchants thrive. A great example of that is what has happened with COVID-19.

    We swung into action back in March and April and designed a program called Main Street Strong. This exemplifies what I mean by merchant first. We built a program that generated $120 million in relief for merchants to keep them on their feet.

    Doordash Restaurants 4-Times More Likely To Survive COVID

    One stat that I love to share is restaurants that were on Doordash during this crisis were four times more likely to make it through the first wave by being on the platform. That $120 million in relief took the form of commission and promotion to drive sales to small businesses. We will continue to focus on our customers, our merchants, and our Dashers and that is what is key right now. We are not going to be bothered by what other companies are doing.

  • COVID Simply Accelerated Retail Death Spiral

    COVID Simply Accelerated Retail Death Spiral

    “The fact is that COVID has already accelerated everything that was taking place in the marketplace,” says the former co-CEO of Whole Foods, Walter Robb. “Some people say that between 30 and 50 percent of small businesses are going to go out of business. We are going to see disruptions as the COVID turns left or turns right. It’s throwing curveballs at businesses. It’s very difficult to operate in this environment.

    Walter Robb, former co-CEO of Whole Foods, discusses how COVID related business closures and restrictions by urban governors and mayors has accelerated the existing trend of retailers closing due to competition with big rivals that have a sophisticated and expansive presence online such as Amazon and Walmart:

    COVID Accelerates Retail Closures

    The fact is that COVID has already accelerated everything that was taking place in the marketplace. So I think you will see some more (retail bankruptcies). I saw some numbers from the Yelp folks that suggested there would be 150,000 businesses fold. Some people say that between 30 and 50 percent of small businesses are going to go out. We are going to see disruptions as the COVID turns left or turns right. It’s throwing curveballs at businesses. It’s very difficult to operate in this environment.

    The main thing is can we keep the economy open in some safe manner? It isn’t whether it’s an essential business or a non-essential business. It’s whether we can keep it open for both the team members and for the customers. It’s going to really determine some of that. Some folks have already thrown in the towel and some folks are going through bankruptcy.

    But there are a lot of folks working hard in retail to serve people. It will depend on whether we going to get some sort of support, both in terms of the main street lending facility amendment or in terms of keeping the economy open to let them continue to serve their customers.

    COVID Simply Accelerated Retail Death Spiral

  • 2U CEO: This Is A Paradigm-Shifting Moment For Higher Ed

    2U CEO: This Is A Paradigm-Shifting Moment For Higher Ed

    “This is a paradigm-shifting moment for higher ed,” says 2U CEO Chip Paucek. “You have to be intentional about it. You can do something that’s great, that students love, that’s totally engaging, and that also creates the right long-term outcome for the student. But you have to flip the classroom. Then when you go to class you’re in a really robust discussion with your fellow classmates, with your instructor, you are learning at a deeper level.”

    Chip Paucek, co-founder and CEO of 2U, discusses how the pandemic has led to a paradigm shift to engaging high-quality online learning for higher education:

    The Whole Flipped Classroom Notion Is Key To Our Success

    We started the company twelve years ago. We’ve been doing this much longer than what most schools have done online learning. I would say doing online learning well is not only possible it’s very obvious. Not only does it not have to be worse than campus instruction, something the President just said, it actually could be better. I think we’ve proven it over 12 years. You have to be intentional about it. When you do you can do something that’s great, that students love, that’s totally engaging, and that also creates the right long-term outcome for the student. But you have to flip the classroom. 

    You have to actually give students high-quality content for them to consume on their own time. A single 2U course has more video content than a season of Game of Thrones. Then when you go to class you’re in a really robust discussion with your fellow classmates, with your instructor, learning at a deeper level. That whole flipped classroom notion has been key to our success. We just passed 225,000 students so we’re doing this at a scale that most people haven’t. We hit 800,000 live classes inception to date. 

    The Great Institutions Have Embraced Online Learning

    We build a comprehensive program for a university partner that incorporates high-quality video content, interactive content, and a lot of readings. Books are still really good by the way. When you get the student from the interactive lesson into their live class it’s not just 90 minutes having somebody talk to you. You’re actually fully engaged from a pedagogy standpoint. You need to engage students. Then it’s not just when class ends you have to support students and bring them together in a way that is very possible online. 

    We did a survey with Gallup that showed 92 percent of our students said they would do it all over again. Honestly, this isn’t new. I feel like we’re all sitting here talking about it as if we all just discovered the internet. I started the company 12 years ago and you can really do something great if you just put your will towards it. We’ve got great schools from all over the world including Yale, Harvard, Syracuse, and Berkeley. They’re great institutions that have embraced it and are doing it really really well. 

    We Just Experienced A Forced Wave Of Remote Instruction

    What we all just experienced in the spring was sort of a forced wave of remote instruction that wasn’t very good but that doesn’t mean that it can’t be great. You really can do something great right if you put your mind to it. It takes real resources and that’s one of the things we’re advising our schools is to invest in high-quality online and really do something great for your students on a go-forward basis.

    It’s not easy to do this. I feel like the schools are in a real bind. None of us expected the NBA to have to cancel all of its games. Nobody’s been through this before. I feel like people that are continually dinging higher-ed forget that this is the single best path of social mobility on the planet. I got a Pell Grant to attend George Washington and it completely changed my life. So it’s not easy but it can be done. 

    This Is A Paradigm-Shifting Moment For Higher Ed

    Take our Simmons University arrangement which we announced a couple of months ago, we’re bringing them fully online for the fall, every single course, all 300 courses, and then offering that program to the world in a fully online version that’ll be at about 50 percent of the campus price. 

    Also, take our Amherst relationship. Amherst College we just announced last week is going online. Think about the prestige of that great liberal arts institution going online. This is a paradigm-shifting moment for higher ed. There is no doubt. You’re going to need to do it if you’re a university president or a provost. We’ve spoken to more university presidents and provost’s in the last four months than we had in our previous 12 years.

    2U CEO Chip Paucek: This Is A Paradigm-Shifting Moment For Higher Ed
  • Used Car Sales Way Up – Defy Dire Expectations, Says Carvana CEO

    Used Car Sales Way Up – Defy Dire Expectations, Says Carvana CEO

    Used car sales have defied the dire COVID related expectations, says Carvana CEO Ernest Garcia. “When it first hit there was no doubt that there was a huge hit to demand,” says Garcia. “We saw car sales drop 30, 40, 50, and even 60 percent very early on. They started to recover very quickly by late April and they have continued to recover. That was definitely not the baseline expectation heading in”

    Ernest Garcia, CEO of automotive ecommerce retailer Carvana, discusses how COVID has surprisingly been a boon to the used car market over the last several months:

    Used Car Sales Up Significantly Year Over Year

    When COVID first hit there was no doubt that there was a huge hit to demand. We saw car sales drop 30, 40, 50, and even 60 percent very early on. They started to recover very quickly by late April and they have continued to recover. Many retailers including ourselves are actually up year over year, significantly in our case. It has definitely recovered very quickly and that was definitely not the baseline expectation heading in.

    The biggest change has been with the decrease in gas prices. There has been a lot of demand for SUVs and a lot of demand for trucks. But there has been a lot of demand across the board. There has been a lot of demand for off-lease vehicles right now as new production starts to spin back up. There is also a lot of demand for older cars that are a little less expensive. I think across the board we are seeing a lot of demand in all of automotive retail.

    There Is Both A Pull Toward Used And A Push Away From New

    To some degree, it is pulling from new car sales because used cars are a little less expensive. To some extent, there is a push away from new car sales because production has slowed down and incentives are being pulled back as a result. That is likely to continue for the immediately foreseeable future. There is both a pull toward used and a push away from new as well.

    Automotive retail is a very interesting market. On the used side there are 40 million transactions per year. On the new side there are 15 million give or take transactions per year. There are about 40,000 dealers out there. This has always been a market that is enormously competitive and enormously fragmented. Dealers have found a way to persevere and have pretty decent margins over the last 75 years.

    We Represent A New Kind Of Business Model

    What we represent is a new kind of business model. It’s an ecommerce-centric model where a customer goes to our website, they select a car, they go through the purchase process, and we deliver it to their door using first-party logistics. Then they get a seven-day return policy. That business model has a pretty different cost structure than the traditional automotive resale model. As a result of that, we have additional opportunities above and beyond most automotive retailers.

    Used car prices have also been an incredibly interesting and volatile place to watch over the last three and a half months. In April, we’ve had the biggest decrease we’ve ever seen in the Manheim Used Vehicle Value Index, which is one of the measures of used car prices that are broadly used. In May and June, we saw sequentially probably one of the biggest increases we have ever seen in used car prices. They are now at the highest prices they have ever been.

    Future Demand Is Very Difficult To Forecast

    That market has spun around quite bit, just like the stock market and other gauges of economic activity. It has been very difficult to forecast and I would not want to forecast where it is going to go from here. On the new side, there are likely to be supply shortages. There is a lot of demand today. Trying to figure out what demand is going to look like over the next six months with increased unemployment (payments) potentially expiring and with less stimulus in the economy is very hard.

    Used Car Sales Way Up – Defy Dire Expectations, Says Carvana CEO Ernest Garcia