Sizzle/Fizzle

Contactless Sizzles, Consumer Debt Fizzles And Sears And Amazon Spark A Sizzle-Laden Partnership

Contactless payments look strong — if you live in the U.K. — and going cashless is increasingly king in China. Meanwhile, consumer debt may have seen another canary drop in its coal mine this week, and Blue Apron might be Amazon’s latest casualty. And speaking of Amazon … Sears landed sizzle-of-the-week status with its Amazon/Alexa/Kenmore partnership.

We’ve got all the sizzling and fizzling details.

 

Sizzle

Contactless payments: Paying without touching is taking off. The rise in contactless payments has some additional data points in place to bolster claims that paying via mobile device is catching on, as promise transforms into practice.  U.K. Finance said this past week that a third of card payments were done the contactless way, and this was up 18 percent year on year to 4.5 billion pounds. The total number of payments in that month stood at 1.4 billion, up 12 percent from last year. Given that the debit and credit card share of total retail sales is at 77 percent, acceleration in contactless may be in the (virtual) cards.

Cashless payments in China: Mobile, mobile everywhere, it seems. To the tune of trillions of dollars’ worth of mobile payments. In China, mobile payments stood at $5.6 trillion as measured by value, which is equivalent to half the country’s gross domestic product and driven by firms such as Ant Financial and Tencent. The latest figure dwarfs other countries such as the United States, where the value of payments done by mobile means came in at $122 billion. In mobile, it seems, you go where the people are.

Tech stocks, a milestone: Tech stocks as a group have passed the dotcom era peak, as of Wednesday. The S&P Tech Sector subset came in at 992 points, better than the previous zenith of 988. Some familiar names such as Amazon, Facebook and Apple helped propel that index, showing that enthusiasm for all things digital is unbowed. The debate on the Street rages over whether the stocks are expensive, though current multiples of 19x projected earnings seems cheap compared to the 48x multiple fetched 17 years ago.

 

Fizzle

Consumers: UBS offers up what might be a canary in the lending mine: The poorest Americans voiced the least confidence in handling their debt loads and staying current on bills. The folks who make less than $40,000 annually are the ones who worry that wages will fall and they will miss bill payments. That dovetails with souring car loans, where delinquencies are getting worse for people with credit scores below 660.

ICO (initial coin offerings): The initial coin offering seemed akin to the initial public offering, where investors would be able to get in on the ground floor of cryptocurrency and expected price increases, netting healthy profits. But this past week saw a hack of note, as hackers made off with $7 million from CoinDesk, directing would-be buyers to send their Ethereum payments to a fraudulent address. Where there’s new technology and novelty and money to be made, investors clamor, and now, it seems, bad guys lie in wait.

Blue Apron: The meal kit firm went public at $10, below an expected range, and now trades around $6.50. The news came this week that Amazon has filed a trademark for prepared meal kits. This means, of course, that Amazon is looking to eat Blue Apron’s, well, lunch. The Whole Foods buyout may be a natural springboard to in-store shopping and outbound meals, and perhaps the busted IPO may stay busted.

 

Sizzle of the Week: Sears’ Second Life on Amazon

In a change of pace so radical from recent trends that we actually checked the headlines twice to be sure, Sears did something yesterday that made its investors so happy that it’s stock price went up — way up.

As in spiking 25 percent yesterday morning in pre-market trading on the news and even closing up at the end of the day yesterday.

In the “if you can’t beat ‘em, join ‘em” spirit that seems to be coming increasingly prevalent in retail these days, Sears has struck a deal with Amazon.

Going forward, Sears will sell its Kenmore-branded appliances on Amazon.com, announcing that its line of smart appliances will be integrated with the eCommerce giant’s website.

“The launch of Kenmore products on Amazon.com will significantly expand the distribution and availability of the Kenmore brand in the U.S.,” Sears CEO Eddie Lampert said in a statement. “At the same time, Sears Home Services and our Innovel Solutions unit will benefit from the relationship as more customers experience their quality services for Kenmore products purchased on Amazon.com.”

Now more closely integrated with Amazon’s flagship AI assistant Alexa, consumers will be able to remotely control appliances throughout their product suite with the “Kenmore Smart” skill of Amazon.

While Sears was once nearly one-to-one associated with appliance purchases in the U.S., the last two decades have seen the rise of competitors like Costco, J.C. Penney and Best Buy take a bite out of that supremacy. Meanwhile, the chain (once America’s largest retailer before handing off the crown to Walmart a little over two decades ago) has struggled with falling foot traffic, falling sales, increasing debts and a consumer base that is getting older and seemingly less engaged by the quarter. Many retail analysts and experts had written Sears off as a “zombie-chain” able to still shamble around, but no longer really living as it once did.

That opinion seems to have been confirmed by its wave of store closures, rush of real estate sales and the decision to liquidate the Craftsman tool line for $900 million in a sale to Black & Decker.

The move — apart from bouncing Sears’ stock price, also took a bit of a bite out of Home Depot, Lowe’s and Whirlpool today — each of which saw a more than 3 percent hit.

That’s good news for Sears, but the firm is still taking a gamble with the pair-up.  The goal is to grow the reach of the Kenmore brand, but it carries the risk that Sears has now given its remaining customers one more reason not to visit the stores. Problematic, since Sears has of late started opening a new store type — one that specializes only in appliances and mattresses. Some are worried this could cannibalize that effort, though others think this is just more evidence of a strategic repositioning on Sears’ part.

“This is consistent with Sears’ aim of becoming more of a remote seller of strong brands without the encumbrance of expensive real estate,” GlobalData Retail Managing Director Neil Saunders told CNBC. “The move makes sense, as it puts Sears’ brand products where customers are shopping and gives them a better chance of selling. That said, in the short term it may create even fewer reasons to visit Sears’ shops, which could put further pressure on that side of the business.”

Sears CEO Eddie Lampert has been aggressively “fighting like hell” (his words) to get Sears turned around. The firm has just come off its latest cash injection from Lampert’s hedge fund ESL, this one worth $200 million. Fresh lines of credit from a very sympathetic creditor aside, earlier this year in a filing with the SEC, Sears expressed concerns about its ability to operate.

Will the Amazon platform be some of the magic Sears needs to turn its business around? Time — and sales numbers — will tell, but Sears has at least managed to do something that it hasn’t been able to do in a while: net some positive and hopeful coverage.

“The Amazon platform is so broad and also focuses on the millennial generation, which is very important for Kenmore to reach,” Tom Park, the president of Kenmore, Craftsman and DieHard divisions at Sears, told CNBC in an interview Thursday.

And now when all those millennials go to Amazon, Kenmore will be the first brand they see when they do that search for a new appliance. It’s not enough for a turnaround by itself, but it is certainly enough to get our attention — and get a sizzle this week for them for the first time in a while.

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