Distribution January 2019
Retail Sales Rise 0.2%
Retail sales edged up 0.2% in November after jumping 0.8% in October. Sales were up 5.3% year to date. Core retail sales, which exclude autos, gasoline, building materials and food sales, rose 0.9% in November after rising an upwardly revised 0.7% in October. However, non-store sales, which are primarily internet and catalog sales, rose 2.3% after rising 0.8% in October and were up 12.1% year over year. Building materials and garden supply stores fell 0.3% but were up 3.5% annually. Many economists are unsure about how the trade wars, plunging stock market and new tariffs will impact retail sales going forward.
Mastercard reported that holiday sales increased 5.1% this year to more than $850 billion, the strongest growth in the past six years. Online shopping rose 19% compared to 2017, according to Mastercard SpendingPulse. Brick and mortar retailers also reported strong sales. UPS expected holiday deliveries to average more than 31 million parcels each day, rising 5% from last year.
CEO Marvin Ellison plans to hire 2,000 software engineers and open a new direct-fulfillment center in the West as part of his ambitious overhaul designed to make Lowe’s more efficient, boost stales in stores and improve customer service. The software engineers will allow Lowe’s to switch to company-written software from the past practice of buying standard software and then customizing it. New CIO Seemantini Godbole says the reason Lowe’s has had five CIOs in the past eight years is that the company has historically underinvested in technology and software. She wants to bring 80% of the software-engineering function inside the company, a process that will take up to three years. Lowe’s expects to spend $500 to $550 million each year through 2021 to pay for the IT changes. It has not yet been determined where the new engineers will be based.
In addition to the new fulfillment center being built in Tennessee, Lowe’s plans to build a second one in the West. Other planned changes include 20 new bulk distribution centers and more than 90 cross-dock terminals which will eventually handle the distribution of bulky items like appliances, riding lawnmowers and grills. Right now appliances take up 90% of the storage space in stores. Lowe’s plans to spend $1.7 billion over the next five years to build those needed facilities. Another ambitious goal is to grow sales to $370 a square foot, up from $335 in 2018. They are also looking to grow comp sales 3% compared to the 2.5% they were expected to grow in 2018. Only two C-level execs survived Ellison’s house cleaning; one of them was CMO Jocelyn Wong.
WM is buying Art.com, the online retailer of art and wall décor. Financial terms were not disclosed. The transaction is expected to be completed in early 2019. Walmart intends to operate Art.com as a standalone website and also add its products to Walmart.com, Jet.com and Hayneedle.com. It’s the latest addition to WM’s portfolio of smaller online brands.
CEO Eddie Lampert made an offer to buy Sears out of bankruptcy for $4.4 billion and keep 425 stores in operation, but by the end of the month his bid still needed to be qualified by the SEC, which could happen some time in January. The bankruptcy court will decide what is the best offer for shareholders, which is not necessarily the highest offer. Sears filed for voluntary Chapter 11 in mid-October.
Ace Hardware and Centerbridge Partners are together weighing an offer for Sears Holdings’ Home Services division that would compete with an anticipated bid from chairman Eddie Lampert, according to Reuters. Earlier in 2018 Lampert’s company, ESL, offered to buy parts of the Home Services division for $500 million. Lampert reportedly plans to forgive some of the debts Sears owes ESL as part of the offer, a maneuver known as credit bidding.
True Value announced a new partnership with Carter Lumber. Carter is a powerhouse in the lumber and building materials industry and is #11 on the ProSales 100. Carter said that True Value’s new business model was appealing to them.
Amazon reported a record-breaking holiday season, and also reported that tens of millions of people worldwide signed up for Amazon Prime, which now costs $119 annually. Amazon devices, including the new Echo Dot speaker and the Fire TV Stick, were big sellers, with millions more sold this year compared to holiday 2017.
Amazon will account for nearly half of all online sales for 2018, according to analysis by Emarketer, up from a 43.5% in 2017. Amazon is expected to generate $258.22 billion in online retail sales in the US for 2018, an increase of almost 30% from the year prior.
More than one billion items were delivered for free through Amazon’s holiday free shipping for all program. Amazon also reported that San Francisco led the nation in the most last-minute Amazon Prime deliveries for Christmas, followed by Austin, Texas; Miami, Florida; Dallas-Fort Worth; Texas and Springfield, Virginia.
Amazon hired SKDKnickerbocker and Greenberg Traurig to
help improve their image in New York. SKD frequently consults in Democratic political campaigns and GT has a well-seasoned lobbying team. State and city lawmakers have questioned the impact Amazon’s proposed 4 million-square-foot campus in Long Island City, Queens will have on the neighborhood and criticized the $3 billion incentive package the city and state offered Amazon. New Yorkers are generally positive about winning the bid for one of Amazon’s new headquarters but are divided about the incentive package offered. They do all agree that they should have a say in Amazon’s plans. Amazon has been bolstering their lobbying operation in Washington and spending more on advocacy groups.
It will be many years before the cities chosen for Amazon’s new regional headquarters will see most of the 50,000 new jobs promised. Next year Amazon plans to add 400 employees in Virginia and expects to reach half of its target hire of 25,000 employees by 2028. Amazon has a lot of work to do before anyone can start working, including office remodels of temporary offices they’re already leasing. It will probably be at least two years before Amazon can break ground on their New York campus, although Northern Virginia may get started a bit sooner.
Amazon and Travelers has expanded Amazon’s Smart Home Solutions to 11 additional states where home insurance customers can receive a free Amazon Echo Dot from Travelers and will also be offered discounts on smart home kits.
Sellers who use Fulfillment by Amazon will soon pay higher fees for products that Amazon considers “dangerous,” including items with lithium-ion batteries and aerosols. The price hike was initiated after a can of bear spray exploded in a warehouse, sending 24 people to the hospital, one in critical condition. The new fees go into effect in mid-February.
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