Data Dive

Data Dive: Walmart And Amex Get Tough; Bitcoin Rebounds

March has arrived, and though the national weather map today indicates that most of the nation is still in the “in like a lion” part of the weather pattern, the early signs of spring are showing. The daffodils are fighting to make it to the surface, the crocuses are up and in some places the grass is starting to even give early indications that it might turn green.

And everywhere you look the competition is getting heating up, too. Walmart is trying to win on price — and taking its suppliers along with them (whether said suppliers want to go along for the ride or not) — Amex is fighting to keep its affluent cardholders satisfied and bitcoin’s price is bubbling up — as buyers strive to catch hold of it before it goes mainstream (maybe) with the Winklevoss ETF.

Ready to dive in?

Walmart Gets Tough On Pricing

Though Walmart’s slogan is no longer “Always Low Prices,” it seems they’ve taken a renewed interest in getting their prices well below the competition — as the world’s largest retailer by sales has kicked off a price-comparison test in about 1,200 of its U.S. retail locations.

The test ranges across 11 states located in the Midwest and South and is squarely aimed at finding and setting new price points for a range of products it sells under its grocery banners, which post roughly 56 percent of Walmart’s sales. Reportedly Walmart is attempting to closing its pricing gap with rival grocery peddlers (like Kroger) and discounters (like Aldi).

And we wonder if that technology comes by way of Jet.com, which was known for its super-duper pricing algorithms.

The move is widely expected to put pressure on packaged good suppliers. A meeting in Arkansas with food and consumer products vendors reportedly came with Walmart more or less demanding that suppliers reduce their prices by 15 percent, according to unnamed sources.

And these are big firms Walmart is putting the pricing pain on — Procter & Gamble, Unilever, Conagra Brands, Kraft/Heinz and Johnson & Johnson were all part of the meeting. As of yet, none of the involved brands have any official comment to offer. The expectation — according to reports — is that suppliers are going to help Walmart win a head-to-head pricing match-up 80 percent of the time.

Walmart spokesman Lorenzo Lopez said the company is “not in a position to share our strategy for competitive reasons.”

A pricing punch-out with Aldi and the other hordes of players in U.S. grocery sales could be costly for Walmart. According to Scott Mushkin, managing director of Wolfe Research and a leading pricing analyst, the retailer could be looking at spending as much as $6 billion to regain market share from all of its grocery rivals. Vendors, however, have confirmed that Walmart has told them it intends to maintain margins on average and lose money on some goods as part of its pricing plan and that it will absorb some of the losses so suppliers can adjust to the new pricing demand.

One supplier noted that his company’s products had declined in price by as much as 30 percent in some stores over the past few months.

“It helped them figure out the sweet spot that drives traffic,” the person said.

Walmart also said it wants vendors to make logistics improvements that would help vendors get $1 billion more in sales and that it would work harder on shipping orders in full and on-time, which would trim delivery costs, reduce re-orders and decrease out-of-stock problems.

“Walmart is trying to go back to where they were 10 years ago when they were absolutely the low price leader,” a large packaged food supplier told Reuters on condition of anonymity. “We understand they are willing to give up profits to a large extent in some cases, so they can invest in their own brand.”

But Walmart isn’t alone in the move to cut prices. Target (in the wake of a punishing earnings report) has announced that it will be throwing as much of $1 billion of its own money into lowering prices for consumers — as it works to drive traffic back to their stores.

Amex Plays Rewards Hardball

The Chase Sapphire Reserve Card, with its fancy metal instead of plastic body and extremely generous points offering for new sign-ups, got a lot of buzz and attention earlier this year. In fact, the card was made so popular by YouTube unboxing videos that the manufacturer ran out of the metallic stock from which the card was made.

And Amex clearly has had enough of Chase turning their affluent customer’s heads — and is now doubling down on how to keep them happier.

Happier — and away from its emerging competitors at Chase and Citibank.

So the Amex Platinum card is getting a makeover. It will be made of metal and will be a lot more rewarding. New perks include $200 a year in Uber rides, richer credits for spending, access to more airport lounges, special dining and entertainment options, and free use by family members of an American Express Gold card.

But as membership has its advantages, it also has its costs. As of Mar. 30, the annual fee for cardholders will increase to $550 a year from $450 a year.

American Express’ platinum customers tend to represent superior profit margins and a greater proclivity for more card-based spending — hence the push from Chase and Citibank to snap up that desirable customer set.

Amex noted it had been working on changes to the Platinum card long before JP Morgan Chase rolled out the Sapphire Reserve card.

“This is a response to listening to our customers,” an Amex official noted. “We are always looking at ways to bring value to our card members.”

That it waited to roll out these long-planned upgrades until right after Chase drastically scaled back the sign-on bonus for the Sapphire Reserve card? Probably just a coincidence.

Speaking of coincidences, good luck and things logic has a hard time explaining — the price of bitcoin is up again.

The Bitcoin Bubble Bounces Back

As of the writing of this story, the price of bitcoin was up to $1278.43 — putting its market cap is well over $20 billion and worth more than the world’s former favorite alternative asset — gold (currently worth $1,237 an ounce).

The pricing hullabaloo (technical term) comes care of a pending decision by the Securities and Exchange Commission as to whether or not a bitcoin exchange–traded fund is in the world’s future.

Yes, bitcoin, the official currency of the digital wild west, is trying to come to the capital markets, and the price surge seems to be based on the notion that a bitcoin-based ETF may work to tone down some of bitcoin’s more unpredictable tendencies.

Unless, of course, it does the exact opposite. More on that in a second.

“If approved, this would certainly give a dramatic condoning of bitcoin by the authorities and powers that be,” digital currency analytics firm Cryptocompare CEO Charles Hayter told Reuters. “Perhaps key would be the institutional money which would flow into bitcoin. This would bring a certain amount of stability eventually, but it could see short-term exuberance by retail traders.”

Not everyone is so optimistic. Some are worried, for instance, about security risks surrounding a bitcoin-based ETF since hundreds of millions of dollars worth of bitcoin periodically go missing at the hands of hackers. (Remember Mt. Gox?) Others are pretty sure bitcoin just isn’t the right type of substance for an ETF.

“Bitcoin is not a stock, it’s not a bond, it’s not a hard asset like precious metal, it’s not a commodity future. It’s a technology that’s very much in its infancy, and it’s not something that in my mind lends itself to being packaged as an ETF,” notes Ben Johnson, director of global ETF and passive strategies research at Morningstar Inc.

Some are worried that it will just make bitcoin more prone to booms and busts that it already is.

Bitcoin entrepreneur Vinny Lingham, for one, recently warned in a blog post that additional quick rises in bitcoin’s value will likely create another boom/bust cycle in the bitcoin ecosystem. A bubble that won’t hesitate to burst, if given the chance by, say, having the price peak over $3,000 too quickly.

“Bitcoin is both scarce and valuable, which will lead to the price continuing to increase over time,” Lingham wrote. “But if that happens too quickly, we will enter another boom/bust cycle …. If it [bitcoin’s value] goes into the $3,000+ territory due to mania/short squeezes/media hype/FOMO and other triggers, then alarm bells will go off for me, and we’ll start approaching bubble territory.”

The SEC has until Mar. 11 to decide the fate of the Winklevoss twins’ Bitcoin Trust, one of three proposed ETFs that could track the value of bitcoin.

Whatever it decides will have little to do with bitcoin’s future as a global currency — as that fate has been decided a while ago (it’s dead). Sorry, Reddit fans.

So what did we learn this week? Price talks. Rewards matter. Bitcoin doesn’t (much).

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