If you were worried that the first few weeks of the holiday shopping season would be frozen by the shock of the election, obviously, the consumer has proven to be unflappable. All thumbs — on devices, that is. That could describe the double-digit growth in mobile shopping that marked Cyber Monday, perhaps signaling that the torpor of Thanksgiving weekend led lots of people to shop from the comfort of their own couch. Getting up, maybe, to go to Starbucks but certainly not to Sears. And if the opposite of “pixelated” could, in a sense, be thought of as "things coming together," then that certainly holds true for Pixel. Could it be that next year's mobile mania will be powered by ... Google?
During a transition, where CEO Howard Schultz is handing the chief executive role to Kevin Johnson, the longer-term growth plan looks to be cheering The Street and other observers. The plan is ambitious, focusing not just on brick-and-mortar count, doubling the store presence across the globe by nearly 50 percent, but, of course, includes mobile and new foodstuffs. Oh, and earnings are slated to grow faster than sales. We like our coffee hot — to the point of sizzling.
Manic Mobile (Cyber) Monday
So, Cyber Monday broke all kinds of records, with total online sales up 12 percent from last year and topping $3.4 billion. But within that data lies another winner. Mobile sales were up 34 percent year over year, to more than $1 billion. Shop ‘til you drop? More like click ‘til your neck cricks.
The big-box retailer might be onto something. After reporting a string of declines in same-store sales, earlier this week, the company said that that measure was up 1 percent, and management stated that foot traffic was on the upswing. True, the growth may be tepid, but during a deflationary environment, the firm has been grabbing the benefits of lower merchant fees post its switch from Amex to Citigroup via co-branded cards. And the company said it was gunning hard on its online presence, with better tracking and fulfillment goals. And millennials are signing up for membership, too.
“We have fallen short” — so said management on the latest earnings call, which may be classified as an understatement. The net loss at the bottom line was 65 percent worse than a year ago. Sales were down in the mid-single-digit percentages at the same-store level, while the overall top line was off 12 percent. The company is exploring options for real estate sales, but what do you do when the bricks and mortar are gone? In the meantime, debt has risen from $2.2 billion as recently as Jan. 2016 to $3.7 billion in October. Sears is getting … seared.
If you’re a bank, it’s a tough (nearly entire) day when you can’t process payments. So it was Sunday into Monday when BNY couldn’t process payment instructions sent over the SWIFT network for 19 straight hours. Backup systems are now in place but might we expect BNY clients to look for backup systems to the backup systems — as in institutions using other banks for processing?
Bitter bitcoin news? Circle, the consumer finance firm, is walking away from the cryptocurrency buying and selling in favor of mobile payments and apps. Bitcoin no longer will be sold back and forth between users (it will still be a settlement token), which takes its visibility down a notch.
Google’s Provisional Sizzle
Google opened up December and the holiday season with some very buzzy headlines about its entrance into the race for high-end smartphone dominance.
“Google Pixel Trounced Apple's iPhone Over The Holiday Weekend,” Fortune boldly proclaimed, and from that proclamation followed a slew of pieces noting that perhaps Google would succeed where so many had failed — to knock off Apple’s smartphone crown.
Fortune’s claims of a trouncing were based on data from app analytics company Localytics, which logged Pixel activations up 112 percent from the four preceding weeks as compared to the iPhone 7’s mere 13 percent pickup in new activations. Localytics figures also had Samsung’s Galaxy line roundly beating Apple as well with an activation rate of 36 percent — though, obviously, it is still markedly trailing the runaway train that the Pixel appears to be.
Apple, apart from coming in third, also saw its new model fare worse than the 6s model faired for activations during the holiday shopping kickoff weekend last year.
It's worth noting, however, that some have claimed the reports of a “trouncing” are perhaps a bit misleading. The iPhone was on the market for about a month longer than the Pixel as of the holiday shopping weekend, and Verizon was knocking down the price of the Pixel by as much as 50 percent during said shopping rush, as part of a promotional push. Moreover, when one looks at the raw sales estimates, about 75 million iPhones are expected to ship this holiday season, whereas the most optimistic projections for the Pixel are forecasting sales around 9 million. Lower-end estimates have the Pixel selling around 3 million.
It’s hard to describe the Pixel as having trounced the iPhone when the iPhone is outselling it eight-to-one on the most favorable estimates.
However, we come not to bury the Pixel today but to praise it and its status as Google’s surprise Sizzler this week.
Because, as it turns out, the Pixel is an increasingly well-liked phone.
Many commentators noted that Google may have gotten the luckiest break in history with Samsung’s Galaxy Note recall, because, while both phones are an iPhone competitor by price point, they are much more directly competing with each other since both are Android platform phones (though Samsung uses a modded Android version).
But though the early reviews for the phone mostly called out its similarities to the iPhone and Samsung offerings, the longer it is in the market, the more it is independently winning fans.
Wired ranked the Pixel the best Android phone in the market this week and got a bit gushy.
“The Pixel … well, it’s simply the best Android phone ever made. The gorgeous handset has a refined design, killer specs, the smartest assistant in the AI wars and (according to the experts) the best camera the smartphone industry has ever produced. All the better to showcase Google’s clean and now well-seasoned mobile operating system. If you want an Android phone, this is the most future-forward option you can get.”
And while other reviews were somewhat less elegiac, most reviewers said that the Pixel manages to make the Android experience more unified and somewhat less “buggy” and just offers some services better, particularly around navigation.
Plus, most analysts have noted that the Pixel does not quite need to be an iPhone-scope hit to hugely benefit the firm.
It just needs to change Android users’ habits some.
Morgan Stanley Analyst Brian Nowak doesn’t have a huge estimate for sales for the Pixel next year. His prediction is in the middle of the pack, in the 5 million–6 million range, with Alphabet taking home about $3.8 billion. By comparison, Apple sold 212 million iPhones in 2016.
But Nowak thinks that Alphabet doesn’t catch up to Apple or even get that close to it in terms of how many units it ships. The Pixel’s best payoff, he noted, could be getting Android users to spend more on their smartphones.
“We see Pixel’s unique artificial intelligence capabilities, deeper app integration, improved computing power and platform and new hardware capabilities leading to higher Android user monetization (increased spend on smartphones) and higher mobile search monetization (as advertisers will spend more as users monetize higher),” Nowak wrote.
The devices themselves will add something to its parent’s bottom line. Nowak forecasts $900 million in gross profit, which is certainly not an amount of money to sneeze at but, for Alphabet and its $65 billion in annual gross profit, that number won’t much register.
But Android users becoming more monetizable and more into using their biometrically secured high-end phones the way iPhone customers are using theirs? That could certainly move the needle for Alphabet some — far more than the devices alone.
It’s early, but good reviews and strong activations mean Pixel has at least earned a provisional sizzle this week.