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There is a ton of news this week, so let’s get straight to it...
Changes in Spotlight Search on iOS and iPadOS 14 beta, a significant update to its Applebot support page, and an increase in crawling from AppleBot signify that Apple may be launching a search engine soon.
As Apple champions user privacy in their product design, there are two significant areas where they fail to protect their users data. First, Apple has abandoned their networking hardware, leaving the market to be backfilled by Google (Nest) and Amazon (Eero). Those advertisers now have router-level access to homes across the country. Second, Google is the default search engine for iPhone.
While it makes sense for Apple to plug these holes, I’m still surprised to see them do it, especially through an internal build instead of acquiring someone like DuckDuckGo.
Apple is now the world’s most valuable company. They may want the money Google gives them, but they don’t need it.
I think this argument is much weaker. Google pays Apple an ungodly amount of money to be the default search engine on iPhone. And all of that money goes to “services revenue,” the focus of Apple’s growth narrative to Wall Street.
Services revenue would take a HUGE blow if Apple parted ways with Google. That does not mean it will not happen. It just makes the argument weaker.
With Apple potentially building a search engine from scratch, it seems likely the product would initially be limited to Spotlight or Siri, before going to the browser to toe-to-toe with Google, Bing, & DuckDuckGo, where it would be solidly in last place. That is something Apple would never stand for.
The iPhone maker will require developers to show a warning label to users before collecting IDFA info on iOS 14, and will also require that users opt in to sharing it. Many in the advertising industry believe this will significantly limit developer access to IDFA information.
Facebook on Wednesday said it won’t collect IDFA through its own apps on iOS 14 devices, a decision that will “severely impact” Audience Network. Thousands of developers use the Facebook platform to fill the ad inventory within their mobile apps, and without IDFA information to help target those marketing messages, Audience Network revenue could drop as much as 50%, the company said. Facebook is considering eliminating the service altogether for iOS 14 users.
“This is not a change we want to make, but unfortunately Apple’s updates to iOS 14 have forced this decision,” Facebook wrote in a blog post. “We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14 in the future.”
Facebook said it expects “less impact” on its own advertising business. The company doesn’t need device-level information for targeting inside of Facebook and Instagram, for example, because it has extensive profile information, as well as phone numbers and emails for many of its users.
Facebook, for instance, has already complained publicly about Apple’s App Store policies twice this month. And today it is criticizing Apple again, while announcing that it simply won’t use Apple’s device identifier on its own apps.
That means Facebook won’t have to show users that pop-up screen asking for permission to track them across the web. But it’s unclear how much third-party data Facebook will use for its ad targeting, or what Apple’s reaction to Facebook’s move will be.
Facebook has already told Wall Street that it expects Apple’s new rules to affect its business. But today it is leaning into the idea that the change will mostly hurt publishers that use Facebook’s ad network to place ads on their own sites — and that it may ultimately have to shutter the network on Apple devices altogether.
First, Hey! Then, Epic Games. Is Facebook next on the docket of public-opinion court?
“In recent weeks, as the political environment has sharply changed, I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for. Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company,” Mayer said in a letter to employees obtained by CNBC.
“I understand that the role that I signed up for—including running TikTok globally—will look very different as a result of the US Administration’s action to push for a sell off of the US business,” he added.
What does Mayer know that we do not? There must be something. Otherwise, why not wait until after the US Presidential Election to make a move?
Walmart’s interest in the popular app shows how serious McMillon is about moving the world’s biggest retailer into the faster-growing arena of media and online content. It has partnered, and bought a stake in, Israeli video-production company Eko, which has developed things like interactive toy catalogs for Walmart.
Other moves have failed, though: Walmart sold it video-streaming service Vudu earlier this year, as the business had been leapfrogged by subscription services like Netflix and Hulu.
📈 Reporting & Revenue
"Nike has a bold vision to create the marketplace of the future, one closely aligned with what consumers want and need," the company said in an e-mailed statement. "As part of our recently announced Consumer Direct Acceleration strategy, we are doubling down on our approach with Nike Digital and our owned stores, as well as a smaller number of strategic partners who share our vision to create a consistent, connected, and modern shopping experience."
The Consumer Direct Acceleration strategy is a digital-focused plan that Nike announced in June.
Many big platforms are expanding into the ‘marketplace’ arena - Shopify’s Shop app, Facebook & Instagram Shop, etc. Meanwhile, many brands are actively leaving existing marketplaces in favor of a stronger DTC distribution.
There are a few reasons why retailers are predicting that customers will start their holiday shopping earlier this season. First, it’s likely that come fall, customers will still be hesitant to visit places like stores where they may encounter a crowd. That means they will either do their holiday shopping online instead of in-store, or try to visit stores on less-crowded shopping days.
Second, many retailers have struggled to fulfill orders in a timely manner throughout the coronavirus due to either an unanticipated surge in demand for specific products, as well as changes in operations to their factories or 3PL. Some analysts believe that this will cause consumers to begin their holiday shopping earlier, to ensure they get specific products in time.
Lastly, Amazon has delayed its annual Prime Day event until the fourth quarter of 2020 (the company has not set an exact date), which may cause consumers to do some of their holiday shopping during that event.
Andrew Lipsman, e-commerce analyst at eMarketer, said that while some people may do more holiday shopping on Prime Day, he doesn’t think the event will take a huge chunk of sales typically reserved for Black Friday or Cyber Monday.
“E-commerce is growing is so strongly, and my expectation is that through the balance of the year, we are going to continue to see those dollars largely stay shifted to having migrated from brick and mortar to online.” eMarketer has projected that while total U.S. retail sales will decline 10.5% this year, to $4.894 trillion, e-commerce sales will be up 18%. He believes that Prime Day will capture some of those sales that may have traditionally gone to stores throughout the year.
Dedicated followers of fashion tend to fall into two groups: those who favor a heavily branded look that’s as subtle as a football jersey, and those who favor a discreet, under-the-radar style that announces itself only to a select few.
E-commerce site Italic caters to the latter set—and those who never before could afford either. It began in 2018 with $13 million in venture funding as yet another millennial-targeting, direct-to-consumer disrupter. The site offers unbranded women’s and men’s clothes, shoes, bags, and home decor produced by the same factories that Burberry, Fendi, Stella McCartney, and other bona fide luxury brands use. And all sold at cost.
For reasons I can not yet put my finger on, this feels more thoughtful than Brandless.
It’s also a moment to position the company as a proactive, friendly player at a time when Donald Trump has come after big Chinese tech companies, specifically TikTok and Tencent-owned WeChat, but this could extend to others, including Alibaba. Some experts worry this might lead to patriotic sentiment among Chinese consumers, but Alibaba CEO Daniel Zhang said last week that Alibaba’s pursuit of making “it easy to do business anywhere” is aligned with the interests of China and the United States. “We are closely monitoring the latest shift in US government policies towards Chinese companies, which is a very fluid situation.”
🏬 Brick & Mortar
Talbott likens Simon's growing sideline of retail ownership to moving up a food chain.
“It's kind of like when suppliers decide that they want to go directly to consumers, and you know, as you go upward in the food chain, the margins get better," he said.
The outlook for these unprofitable brands is certainly brighter if they no longer pay rent. Is this the beginning of the great retail consolidation? Could property owners emerge from the pandemic with malls full of captive tenants?
Among the acquisitions from the last year:
- Brooks Brothers
- J. Crew
- Lucky Brand Jeans
- Forever 21
- J.C. Penney?
Because many insurance policies didn’t cover pandemic-related losses, landlords have offered various concessions to attract and retain tenants, including allowing them to defer part of their rent if another shutdown is ordered. Both sides get breathing room: Tenants are able to lower expenses while landlords are still able to collect some money for overhead and their mortgage.
“You have to provide the tenant an easy decision. If you make it complicated, you’re not going to get this done,” said Philippe Lanier, principal at EastBanc, a property developer, owner and manager of more than 45 open-air retail properties in Washington, D.C.’s Georgetown neighborhood.
Locally, I’ve heard commercial landlords are offering month-to-month leases to keep vacancies to a minimum.
Thus, ecommerce becomes the only sales channel brands have complete control over and can rely on in what will be a busy end of the year. Not only does ecommerce offer brands full control, but it’s also quickly becoming the preferred shopping channel, whether brick-and-mortar locations are open or closed. From our recent research, COVID-19 has encouraged 63% of U.S. consumers to buy goods online that they had not considered before the pandemic.
Complete control seems generous, especially considering the stress most delivery services are currently under.
This strategy can be taken a step further with the idea of in-store fulfillment. For DTC brands with brick-and-mortar locations, turning storefronts into small distribution hubs can turn lost real estate into a revenue-generating opportunity. Items can be shipped out directly from various store locations to tighten the supply chain and ensure delivery isn’t overly reliant on one or two primary distribution centers. Automated technology can help speed up this process even faster without putting a strain on store associates.
As we inch closer towards peak-season, DTC brands are at a tipping point. The holidays present a golden chance to make up for lost revenues experienced in the COVID-19 fallout. If they can ditch the big-box retailers and take control of ecommerce channels, success will follow. But their supply chain must be up to the challenge, as the overall customer experience has never been more critical.
Optimizing the inventory for e-commerce was more of a cultural shift than a technological fix for the retailer — one Racer said he had to fight for.
"Everybody's trying to manage inventory based on the budget. And you can't manage a budget inventory when sales are growing 30% or 20% ... and your budget was planned at 10%. So we had to shift the culture of the company," Racer said.
Aligning inventory with sales forecasts led to a more forward-looking mindset, he said, which made a significant difference in the company's stockouts.
"Our out-of-stocks are industry-leading, or at least close to that, because we're always looking ahead," Racer said.
🛠 Tips & Tools
🤷🏻♂️ Just For Fun
"We find ourselves in a unique situation — having an iconic slogan that doesn't quite fit in the current environment," said Catherine Tan-Gillespie, global chief marketing officer at KFC in a statement. The menu isn't changing and the company said the slogan will return when the "time is right."
My guess is that Paul and Matthew were building something like a stealth Geiger counter. Something that DOE agents could use without furtively hiding it. Something that looked innocuous, that played music, and functioned exactly like a normal iPod. You could walk around a city, casually listening to your tunes, while recording evidence of radioactivity—scanning for smuggled or stolen uranium, for instance, or evidence of a dirty bomb development program—with no chance that the press or public would get wind of what was happening. Like all other electronic gadgets, Geiger counters have gotten smaller and cheaper, and I was amused to run across the Radiation Alert Monitor 200, which looks an awful lot like a classic iPod.
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