What can we learn from companies shutting down online stores?

Starbucks has recently shut down its online stores. As a pioneer in sales and marketing strategy, Starbucks may be telling us something about the way businesses will have to operate soon. Since jumping onto the Central Perk culture from hit TV-series – Friends, they have revolutionized food and beverage in the last few years by making customers pay and pre-order using their smartphones. Their culture of fast coffee purchases using smartphones was influential enough to inspire credit card companies to produce cards the contactless cards we all have today. Starbucks are always ahead of the game.

 

Starbucks has been a innovator of trends for the last decade
Starbucks has been a innovator of trends for the last decade

 

In the last few years, companies have shifted from high-street retailers to online websites, selling their goods using only their web-client as a means to interact. It is easier for the client, it is cheaper for the company, and it means that people have better access to goods and services. So why have Starbucks shut down their site and discontinued online selling?

Starbucks’ new campaign strives to get people to leave their houses and come into their stores as opposed to surfing their products at home. Their CEO stated that he wants Starbucks to be an “experiential destination.” Customers can surf the net and check out their products using the app, but cannot buy anything without entering a store. This means you can order a coffee on the app and pop in and grab it, but you cannot have anything sent to your house. There must always be some physical interaction with the brand.

This is an interesting move. Why is it that we are seeing this shift back to high street retailers? What is it that companies value in such strategic shifts? Firstly, it allows companies to compete with giants like Amazon, who have a large market share, and sell the products of others. When we think about it, Starbucks would be extinct if Amazon found a way to sell their coffee online. This revolution would hit Amazon hard if Starbucks managed to make a trend of “experiential destinations,” as Amazon do not have a place where customers can come in. If this becomes a trend, it will make companies with a physical presence shine.

Secondly, it makes their product more valuable. Nike and other fashion companies have saturated the market with their goods, they are no longer seen as special. The consumer engagement is lower and people care less and less about high-quality Nike products. They are also available on Amazon. It is more than likely that Nike will swiftly follow suit, and emulate the synthesis of internet marketing and in-store experience. This could be the future for all big companies that sell goods online.

If successful, this business model will have a significant impact any company whose business model is focused in online sales. It will give power back to retailers, and will hinder “middle men” like Amazon. But before all this, they are going to have to convince the world that experiential destinations are successful.

 

 

Starbucks is a place we can work in or relax
Starbucks is a place we can work in or relax

(Please note: James O’Leary does not currently hold a position in: Amazon, Nike, or Starbucks. Henry James International does not currently own a position in: Amazon, Nike, or Starbucks)

 

Does Apple’s New iPhone Launch Signpost A Slowing Of America’s Economy?

 

iphoneWith stock indexes reaching an all-time high, the big tech stocks – FANGs (Facebook (FB), Amazon (AMZN), Netflix (NFLX), Alphabet (GOOG), and Apple (AAPL)) – may have lost their mojo. The most recent setback to one of the major tech companies is Apple (AAPL). According to Barrons, their new iPhone and Apple Watch are not going to meet sales expectations.

The exact reasoning for APPL’s plummet in sales is relatively unclear, but we can gather something from recent international trade relations. Firstly, China has been investing less in the American economy year by year. This is not of direct fault of APPL, but of China’s decision to cut down on outsourcing and invest more in its own domestic products. The price of copper also took a hit earlier this month due to China’s moderating demands which shows it is not a tech-centred issue.

It has also been evident that the iPhone 8 has been subject to slander on all social media platforms. Every time the Facebook and Twitter community decide they do not like a product, it has a direct negative effect on the sales of that product. It symbolizes that their clients are not happy with their products. APPL have since admitted having poor sales. They have also publicly acknowledged problems with their watch.

Of course, just because one tech company is underperforming, we should not begin to worry about the future of the American Stock Market. However, when FANGs struggle, we cannot throw caution to the wind. These stocks represent a large portion of market capitalization, and it most definitely will be a concern for the S&P 500 and Nasdaq.

On the surface, the American market seems strong due to stock prices chugging higher, regardless of APPL’s recent decline. But analysts are persistently pointing toward a low reading of Chicago Board options Exchange Volatility Index (VIX). The VIX, commonly understood as the fear index, signposts to us the volatility of the market. If it is low, then there is little fear of for investors looking to invest. The index is currently high. This means, although stock prices are rising, the market at any second could be volatile. Risks that were once safe, become high-risk. It makes for an uncomfortable climate that investors tend to avoid.

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Apple’s sales to China have underperformed, but this should not necessarily spook investors. It means that other regions will have to outperform expectations. It is possible that demand is coming from elsewhere, and that due to the September hit on the Copper industry, Apple realized China would underperform regardless, and thus changed their target location. In other words, lower sales to China is not directly related to the outcome of the market. We could see a resurgence of APPL shares shortly, when the iPhone is released.

According to Michael Khan, APPL and FANGs decline does not spell the end for the American market. It seems that in the current financial climate, the failings of APPL’s most recent product is being supported by other facets of the market. The market could remain stable, bearing in mind its normal fluctuations. Unless there is some major political shift in congress, or a major international confrontation – everything should level itself out.

(Please note: James O’Leary does not currently hold a position in: Amazon, Alphabet, Netflix, or Twitter; and Henry James International does not currently own a position in:. Amazon, Alphabet, Netflix, or Twitter)

(Please note: James O’Leary currently holds a position in Apple and Facebook; and Henry James International currently owns a position in Apple and Facebook ).