Daily Data Dive

Data Dive: Win, Lose Or Draw Edition — American Express, Shake Shack And Amazon

With the MLB playoffs underway, the NFL well into its regular season and Washington, well, being Washington as usual, this week was all about keeping tabs with winners and losers in the news cycle.

And while the scorekeeping was less apparent in payments and commerce this week, the action on the boards was still pretty notable.

American Express managed a big win in court — and may have definitively moved one step closer to closing the chapter in its history knows as “The Costco Affair.” Cash, on the other hand, took a drubbing as a major retailer decided to go cashless. And Amazon is inching closer to becoming a direct competitor to UPS and FedEx here in the U.S., which was enough to send big shockwaves through its future rivals’ stock prices.

So, how did the games play out?

 

A Win in Court for Amex

In a rare bit of good news in a story that has been mostly bad news for American Express (Amex), the credit card company was able to dismiss the lawsuit brought against them by their shareholders.

The suit stemmed from the 2015 loss of their co-branding relationship with Costco, as well as shareholder allegations that Amex had defrauded them by concealing the coming end of the relationship.

U.S. District Judge Paul Gardephe in Manhattan found that American Express had not, as they were accused, improperly understated risks or troubles in its 16-year relationship with Costco. The judge found that Costco’s opinion of Amex as “just another vendor” and one that could be replaced with a “cheaper” rival would only have given Amex fair reason to believe that Costco would drive a tough bargain in negotiation — not that they would quit negotiations and find a new vendor.

Moreover, the judge found that Amex didn’t make an effort to hide the fact that Costco accounted for 18 percent of its revenue and 20 percent of its loans.

The plaintiff’s lawyers did not immediately respond to requests for comment.

Amex execs confirmed, through a spokesperson, that they are pleased with the ruling.

The win in this lawsuit is the rare silver lining in a story that has mostly been a series of dark clouds for American Express. Amex stock price lost $8 billion in value in the two days after the loss of the Costco contract was disclosed.

The stock has since climbed back up, and Amex has been steadily moving its model to attract a larger user base. But it seems that Costco’s defection is now one step closer to being permanently in the rear view.

 

Shake Shack Says Bye-Bye to Cash

Score a big win in the war against cash this week — and a big loss for good old paper currency. Shake Shack will test a new store design that takes digital payments … and digital payments only.

According to the company’s CEO Randy Garutti, the retailer will be implementing a cashless kiosk in its soon-to-be-opened Astor Place location.

The test store will not have a cashier counter — guests will instead use digital kiosks to order their food, or utilize their smartphones if they have the mobile Shake Shack app.

The cashless kiosks will be manned by “hospitality champs” — employees whose focus is to make sure customers’ time in the restaurant is as pleasant and problem-free as possible.

Orders will go directly to the kitchen, which has also had a reset to “eliminate friction time,” Randy Garutti told CNBC.

Customers, he noted, still often use cash to pay at Shake Shack locations, but the firm is investing in frictionless experiences, and is interested to see what happens when the cash option is removed. The hope is that the experience will be improved for all diners.

In addition, instead of the traditional Shake Shack buzzer, customers will get a text message when their food is ready, so they can leave the restaurant while they wait and still be sure to get their meal hot and fresh when it’s available.

“It’s really a guest-centric strategy,” Garutti told CNBC. “We get the best people and the best hospitality. It’s not just about the hamburgers.”

Garutti noted that he expects this new type of Shake Shack location will also help to improve delivery speed and packaging. He told CNBC that the retailer plans to do “a lot of listening” at its Astor Place location to get a better sense of what customers like and want.

 

Amazon vs. UPS and FedEx 

The rumors have been swirling for a long time — and at long last, it looks like they might be true after all.

United Parcel Service and FedEx stocks were under pressure Thursday (Oct. 5) after reports surfaced that Amazon is testing its own delivery service to reduce congestion in its warehouses and offer more products for free two-day shipping.

Under the program, Amazon will pick up third-party merchants’ packages from warehouses and handle delivery to customers, something that UPS and FedEx have been doing for Amazon. The company could still use UPS and FedEx, but with the new service, Amazon has more control over how third-party merchants handle shipping and packaging. Amazon will also be able to reduce overcrowding in warehouses by keeping products on the merchants’ premises, while also cutting costs.

Reportedly called Seller Flex internally, the two-day shipping service has been up and running in India since 2015. Amazon has now started to offer the service to U.S. merchants as part of a slow rollout, with testing happening on the West Coast this year and plans to expand to more states in 2018.

Currently, many third-party merchants use Amazon’s warehouses to store their products, preferring to pay a fee to them rather than keep products on their own premises. But as the holidays get closer, Amazon’s space resources often get stretched. For years now, Amazon has been looking to reduce its reliance on the two leading couriers, after shipping delays during the 2013 holiday rush resulted in widespread refunds getting issued to customers.

So, the winners this week were clearly digital payments and American Express, while cash took a bit of a hit on the chin.

And while it is a little too early to call a winner in the race between Amazon and the nation’s two leading couriers — what with the race not having officially started yet — the consumer clearly makes out like a bandit.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 AML/KYC Tracker provides an in-depth examination of current efforts to stop money laundering, fight fraud and improve customer identity authentication in the financial services space.

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