Christopher Matthews
Featured

Charming Charlie becomes 20th major retailer to file for bankruptcy this year

Charming Charlie, the Houston-based jewelry and accessories retailer, announced Tuesday that it reached an agreement with lenders and equity sponsors to clear the way for its filing of Chapter 11 bankruptcy.

What went wrong: Charming Charlie's bread-and-butter, affordable jewlery, is an ideal product for online sellers, given that it can be warehoused and shipped cheaply. What's more, even as business migrated online, Charming Charlie overextended itself, opening 79 stores between 2013 and 2015.

Why it matters: It's the twentieth major retailer to have filed for bankruptcy protection in 2017.

Charming Charlie burst onto the retail scene in 2004, with stores uniquely organized by color, and offering products at prices between high-end jewlery stores and discount shops like Claire's, which is aimed at the teenage market.

Featured

How Amazon took over the apparel market with no-name clothes

Amazon CEO Jeff Bezos. Photo: Ted S. Warren / AP

Amazon has quietly become the second-largest seller of apparel in the United States, investing heavily in its own private-label offerings, which customers have flocked to for their value. As designer Jackie Wilson tells Bloomberg:

They are not concerned at all about how many units they sell, and they’re not focused on margins. They’re concerned about customer satisfaction. They want five-star reviews.

Why it matters: Younger shoppers have become much less loyal to name brands, and retailers like Amazon, Walmart, and Kohls have capitalized by recruting designers and Asian manufacturers to create their own lines of apparel. Amazon's clothes are so popular that 40% of all e-commerce clothing sales go through the platform.

Featured

The great American jobs machine chugs along

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. economy added 228,000 new jobs in November, while the unemployment rate stayed firm at 4.1%, the Labor Department said Friday.

  • Manufacturing job growth led the way in November, adding 33,000 new jobs, and bringing the total new manufacturing jobs in 2017 to 189,000.
  • Even the battered retail sector added more than 18,000 new jobs, bringing employment in that sector to levels not seen since March.

Why it matters: As lawmakers rush to pass tax reform aimed at goosing the economy, the jobs market is running as hot or hotter than any time in the past decade.

One puzzling thing: Wage growth still remains muted, even with rock bottom unemployment. As economist Justin Wolfers frames it:

Implications for the Fed: Incoming Fed Chair Jerome Powell will have to navigate this vexing question as the central bank attempts to steer interest rates higher without puncturing the economic recovery.

Featured

Wall Street can't wait to short bitcoin

Illustration: Rebecca Zisser / Axios

The price of bitcoin is up more than 1,500% percent this year. Next week traders will get a way to bet the price goes down.
Why it matters: The average holder of bitcoin now are millennials, counter-culture folks and "other amateurs who are interested in the technology," said Ihor Dusaniwsky of financial analytics firm S3 Partners. New futures trading in bitcoin will open the market to professional traders.
"Current bitcoin holders are the gazelles in the plain, and the tigers and lions are about to get released."
The CBOE will begin issuing Bitcoin futures contracts on Dec. 10 that will let sophisticated investors bet against the asset more easily than ever before. This new instrument, along with similar upcoming offerings from the CME and others, could pave the way for a serious bitcoin correction.
  • Before now, the only way to short bitcoin was through Grayscale Investment's Bitcoin Investment Trust, which Dusaniwsky called "extraordinarily expensive" and hard to trade because of the limited number of shares.
Trading futures will be different because traders won't have to ever own actual bitcoin, which are by design very limited in supply. These contracts will allow more people than ever before to cheaply and to easily buy and in particular, sell large quantities of bitcoin.
But short selling bitcoin can be even riskier than owning it because when you buy an asset, the most you can lose is your initial investment. When you sell an asset short, your losses are potentially infinite, limited only by how high the price goes.


Data: CoinDesk; Chart: Axios Visuals

Featured

Dollar General to open 900 new stores in 2018

Photo: Charles Krupa / AP

Investors sent shares in Dollar General higher Thursday after the company announced better-than-expected sales growth and plans to open 900 stores in 2018.

Why it matters: Dollar General avoided the struggles of the broader retail industry by focusing on poor, rural communities overlooked by Walmart, which are home to customers living paycheck-to-paycheck with limited access to credit cards.

But the planned expansion is in part a bid to go after affluent shoppers. "We are encouraged by the early progress," Neil Saunders, managing director of GlobalData Retail, said in a research note to clients. "The company is capturing a more significant share of spending from middle income and more affluent Americans."

  • Dollar General credited its strong 4.3% same-store sales growth on its success bringing in these type of shoppers, who are able to spend more per visit.

Featured

Open borders good for Walmart customers, says chairman

Walmart Chairman Greg Penner. Photo: Danny Johnston / AP

Walmart Chairman Greg Penner told an audience at the Fortune Global Forum in Guangzhou, China, today that "open borders and free trade have been good for our consumers." He added that each of the past 11 presidential administrations has sought out the opinions of the company on such matters due to Walmart's large size and U.S. employee base of more than 2 million.

Why it matters: Walmart has long been associated with red-state America, but the company has recently clashed with the GOP's anti-free trade faction, as evidenced by the lobbying it did to kill proposal earlier this year to increase taxes on companies that import goods from abroad.

What we're watching: Look for Walmart to increase pressure on lawmakers to stand up to the increasingly influential protectionist faction in the White House.

Here's what else Penner had to say:

Walmart is made better by "being paranoid" about the competition.

"We're at our best when we've got a competitor that's really challenging us. In the early days, it was Sears, and then it was Target. But we're at our best when we've got competition that are really pushing us."

On the challenges of integrating Walmart's in-store and e-commerce businesses.

"When we set up ou e-commerce business initially, we had it completely separate, and found that that didn't work because we couldn't leverage the core assets of the company. And then we brought it in, but found there wasn't enough risk taking . . . Getting people to work together . . .that may sound simple, but that's not easy. You have to have risk takers, but it's hard to get that going."

On how the company is managing its expansion into China by partnering with JD.com:

"Here' in China, we had an e-commerce business, Yihaodian, but we sold that business to JD.com and went all in on the JD partnership. We just felt like we had to be part of a bigger ecosystem to get our sales going. We've leveraged the JD platform, where we can access 90% of the population beyond our 400 physical stores. And then we're innovating—we've got a service out of 150 of our stores, where you order from the JD platform, it gets picked at our stores, and it's delivered within an hour."

On managing a company of Walmart's size and scope:

"There's only so much you can control in a job you do. I mean, we are big company. We have 2.5 million associates around the world and almost 12,000 stores. Something bad is going to happen everyday, and something good is going to happen everyday."

On what American companies can learn from East Asia:

"I've been coming here for fifteen years . . . they have this mentality of 'we're going to get things done.' First, that was these big infrastructure projects, but a lot of that shifted into innovation. We're seeing incredible innovation in this market with things like rapid delivery that other markets of ours we're going to be following from and learning."

Editors note: Penner is an investor in Axios.

Featured

The smart-speaker war is on

Illustration: Rebecca Zisser / Axios

Retailers think this is the holiday season of the smart speaker, with Google, Amazon, and other tech firms spending big on marketing and discounts to get their voice-assistant technology into as many living rooms as possible.

David Watkins of Strategy Analytics tells Axios that 14 million smart speakers will be sold globally during the final three months of the year, driven by recent, heavy discounting of Google's Home and Amazon's Echo devices, as well as evidence that Alibaba's Genie is outselling expectations in China.

Why it matters: That is a lot of smart speakers: these devices tend to be bought one or two per home, and there are just 125 million households in the U.S.. Amazon and Google are going all out to move them, not because they earn a profit on heavily discounted sales, but to hook consumers and open up e-commerce and advertising revenue down the road.

Why retailers and brands should worry: Those revenues have to come from somewhere. One possibility is that they will be driven by new marketing spending by retailers and brands specifically aimed at these platforms; another is that these devices will motivate shoppers to do more shopping over the Internet.

Thumbs on the scale: According to Suzanne Tager, senior director of Bain & Company's retail and consumer products practices, Alexa-enabled Amazon devices steer customers toward Amazon private-label, in addition to items they have previously bought. Bain conducted a voice-ordering test across categories using Amazon Echo and found:

  • If a search falls within a category in which Amazon offers private label products, "Alexa first recommends the private-label products, even though these products represent only about 2%" of the total good sold from Amazon inventory, Tager says. Amazon did not respond to emails.
  • RBC Capital estimates that by 2020, 128 million Alexa-enabled devices will be active globally, meaning that a bias towards Amazon or other products on this platform could have a serious effect on the retail industry.

Google to the rescue? Chris Taylor, who formerly ran Target's experimental Store of the Future, cites retail partnerships involving Google Assistant as an example of what might work.

  • Walmart, Costco, Home Depot and Target all allow purchases through Google Assistant.
  • In a test, Gene Munster of Loup Ventures said he found that the Google Assistant's AI seems superior to Alexa's. He said Assistant understood questions better, and that it is rapidly improving. This will become more important as these companies attempt to add capabilities, like complex queries and understanding conversations with multiple participants.
  • But Amazon is not without partners of its own—Best Buy and Starbucks are working with Alexa to sell their products. Pop up stores that Amazon is opening with Calvin Klein in New York and Los Angeles also feature Echo in the dressing rooms.
  • And so far Amazon's lead in the smart speaker race is a commanding 71% market share to Google's 26%. And according to Technalysis Research, 69% of users detect little to no accuracy differences between the assistants.
A rock and a hard place: Tager says that competition resembles "the early days of a classic platform race," where tech companies compete to lock in both users and providers of goods and services.
  • The creation of dominant, high-tech platforms should be eyed warily by those who will be forced to compete or collaborate with those platforms, Tager said.
  • If voice becomes a truly popular means of commerce, brands and retailers will have to figure out how to negotiate yet another layer of technology inserted between them and the customer. "Instead of making sure you're on the first page of search results, you'll have to make sure you're the one or two items that Alexa suggests you buy," she said.
  • Taylor said voice may follow a track similar to the invention of social media—remaining a curiosity for many but a crucial promotional tool for those who figure out how to best reach its most dedicated users.
Featured

Steinhoff CEO quits, accounting investigation to follow

Photo: Diane Macdonald / Getty Contributor

South African retail conglomerate Steinhoff, which owns the U.S.-based MattressFirm, announced Wednesday that CEO Markus Jooste had tendered his resignation from the company after the board learned of information relating to "accounting irregularities requiring further investigation." Steinhoff is the world's second-largest furniture dealer with operations in Europe, Africa, Australia, and the U.S.

Why it matters: The company's stock fell more than 60% during trading Wednesday in Frankfurt, where the stock is listed. "This story has the smell of Enron, which rocked financial markets, starting in 2000," Writes Raymond James analyst Budd Bugatch in a note to clients Wendesday. "It is too soon, obviously, to know the ultimate impact of this mess."

Featured

Luxury brands win right to stop sales on Amazon in Europe

The European Court of Justice ruled Wednesday that luxury brands have the right to prevent retailers from selling their products on third-party marketplaces like Amazon.com if the restriction is motivated by the desire to preserve the brand's exclusive image.

Why it matters: Brands have chafed at their inability under U.S. law to prevent retailers, who sometimes acquire products without the brands' consent, from reselling that merchandise through online marketplaces.

"The quality of luxury goods is not simply the result of their material characteristics, but also of the allure and prestigious image which bestows on them an aura of luxury," the decision reads, further arguing that restricting where luxury goods are resold isn't anticompetitive, but necessary to protect the integrity of the product.

The ruling resulted from a suit in which U.S.-based Coty, which manufacturers luxury cosmetics brands like like Marc Jacobs and Chloe as well as more mainstream brands like Covergirl, argued that German retailer Parfümerie Akzente was violating the terms of its contract by reselling its brands on Amazon.com.

Featured

Amazon makes its Australian debut

Amazon CEO Jeff Bezos. Photo: Ted S. Warren / AP

Amazon likes to call itself "the everything store," but it's also on it's way to being the everywhere store, launching its 12th global marketplace Tuesday in Australia. But the retail reckoning that many observers had predicted when Amazon finally unveiled its Australian website didn't materialize, as customers shopping on Amazon.au found selection to be lacking and prices high, Reuters reports.

Why it matters: Stocks of Australian retailers like Myer Holdings department store rose on the news of Amazon's lackluster debut, but Australian retailers shouldn't get too comfortable. As the Australian Financial Review warned earlier this year, "While other companies dread making colossal mistakes, [Jeff] Bezos seems just not to care," arguing that Amazon's deep pockets and long-term outlook allow it to profit from the lessons learned through initial failure.