Month: September 2016

Business, Economy

No Rate Increase… For the Time Being

Did the US Economy Just Dodge a Bullet?

No Rate Increase…..For the Time Being

Federal Reserve policy makers kept the current key interest rate steady……for at least the next couple of months, thus avoiding a potential stock market disruption and keeping the Central Bank in a “holding pattern,” until after the November Presidential elections.

The Federal Open Market Committee’s decision means that big stock price declines or a slowing economy due to an interest rate increase are less likely at this time.  Brett Ewing, Chief Market Strategist for First Franklin Financial Services said this was probably a good decision, “…..because the market was not positioned (prepared) at all for a rate increase; there would have been total chaos!”   As it was, stocks rose on the Fed’s announcement of taking no action at this time.

At her news conference, Fed Chair Janet Yellen said she saw improvement in the U.S. Economy but little evidence of risky inflation.  She further said that holding off on a (rate) hike could allow more people to come back into the labor force sooner.

“We are generally pleased with how the U.S. economy is doing, “she said.  “The economy has a little more room to run than might have been previously thought and that good news…… (and) remember that inflation continues at below 2 percent.”

This lack of action on the Fed’s part encouraged investors who have continued to drive stock prices to unprecedented highs this year, fueled in part by the Fed’s continued easy access to money.    Yellen and the Fed also offered some reassuring words about the state of the economy while hinting at a possible rate hike in December.

Fed Formal Statement

“The labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year, “the Fed voiced in its formal statement Wednesday afternoon.  “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

“The other side of the coin…..”

However, the other side of the coin regarding the lack of a key interest rate increase is that the Central Bank is signaling that it does not yet believe the U.S. economy is strong enough for even a minimal rate increase.  Hence, even the slightest tightening of monetary policy by the Fed may be more than the current fragile economy could support.  The Fed raised the rates this past December for the first time in nearly a decade, but it was unwilling to do so again today despite what is a stated low unemployment rate of 4.9% accompanied by warnings that inflation could spike in ways that would be difficult for the Fed to control.  Some respected Economists suggest that these data points taken as a whole could mean that published unemployment rates, inflation numbers and other economic data espoused by the Administration may be suspect at best.

The Feds target rate is now just 0.25% to 0.50%, considered a remarkably low range this late in an economic recovery that will no doubt provide the Central Bank little wiggle room to maneuver should a financial crisis or potential recession fears arise.  So while the Fed’s move dodges the concerns of a market meltdown triggered by a rate increase, it also offers fresh evidence that the economy is obviously still very tenuous.  In fact, the Fed has now also reduced its outlook for economic growth this year to 1.8% from 2.0%…while not changing overall projections for 2.0% growth over the next two years.

One very interesting situation that arose during today’s Committee Meeting of the Fed Governors was that three members of the Fed’s policy-setting committee voted against the decision to not increase the current key rates.  This number of voting members breaking with the other Governors was a significant point on its own.  These Governors argued for a quarter-point increase to be implemented at this time.  It was noted that investors have already done some of the Fed’s work by increasing borrowing costs and generally tightening financial conditions without the Fed having to make an official policy move.

Whether the Fed chose to not increase rates today out of a desire to not cause a disruption of the general financial markets or because they felt the economy was currently percolating along at an acceptable level, conventional wisdom says that with a strong voice from some committee members voting for an increase, it is a strong bet that December may indeed see the first rate increase in a year.

If you have any questions or concerns about what a lack of a rate increase today may mean for your business moving into the Holiday Sales Season, feel free to contact us at any time.  Mosaica…….you can count on us to be there for you.

Country, Ecommerce

Global Retail Sales… Canada & UK… Let’s Start with the Basics!

Global Retail Sales……

Canada & UK

……Let’s Start with the Basics!

If you are a frequent visitor to our MosaicaFX website, you know that we try and highlight different international markets by country or region at least every couple of weeks or so.  Our goal in providing you this type of information is to primarily help ecommerce based Sellers when it comes to them identifying new markets and the challenges each one of them may present when they enter that global marketplace.  While we will continue to offer those types of articles, we thought we would try something a little different with this one.  In this article we will touch on the Retail Sales markets of Canada and the UK.  As both of these countries are tremendous trading partners with us, they share several other similarities that make it logical to combine them in this research.

First, let’s touch on what exactly (Global) Retail Sales is defined as.  A retail sales report is simply the direct measurement of consumer activities as the retail level.  Higher retail sales activity (volume) is generally better for the country’s economy as well as for its currency.  Lower retail sales activity is considered a negative for its economy and it is not good for its currency.  Most economists equate retail sales with consumer confidence.  As consumer confidence is one of the excepted indicators of an economies overall health, it is expected that as a “base-line,” consumers will spend more money in retail sales if they feel their wages can afford it and they have an overall feeling that their employment is stable (for the time being).  Retail Sales is generally measured against “large ticket” and “small ticket” (cost) items.  They may include automobiles, appliances, electronics, restaurant meals, clothes, etc.  However, as a rule, they do not include essentials like medicine, medical services or devices, insurance, repairs and repair parts and other expenditures that would generally not be considered luxuries or nonessential items.  Think of it this way; if you don’t absolutely have to have it for health or safety (basic food, clothing and shelter) but you purchase it anyway, then that purchase is an indication of how you as a consumer feel about your personal finances and the economy at large.

“….the UK and Canada share many similar traits in retail.”

For the international Seller, Both Canada and the UK share many of the same traits.  They both are overwhelmingly English speaking with similar high-rates of education and employment for their citizens.  Both populations reflect similar concerns for the environment, love American made products and are in a general sense, easy people to get along with.  The family unit in both countries is structured (again) in a similar fashion averaging the same number of children in a nuclear family with both parents (on average) employed.

An interesting aside about the UK is that even after the Brexit vote, they have seen a jump in Retail Sales.  Published Retail Sales jumped by 1.4% for July (after adjustments), smashing expectations of just 0.1% to 0.2%.  They were actually 1.5% if you remove the recorded sales of fuel for the country which is even more impressive.  This is a significant example of how consumer confidence can override economists projections based on more logical assumptions about the market place.  Conventional wisdom was suggesting that the negative impact of the Brexit vote would dampen consumer confidence because “fear of the unknown,” generally has a negative effect on spending.  However, in this case it seems to have had the opposite effect.  Overall, it appears that enthusiasm for a pending (greater) free-market catharsis for the UK may actually energize certain marketplaces.  While a “jump” of 1.4% in positive growth may not seem to be a very significant data point, when you consider that world-class economists were actually foretelling negative declines for retail sales post Brexit, it becomes apparent that the current data is head-turning indeed.

Canada has also shown a very strong Retail Sales performance for the last several months.  Our Canadian neighbors increased Retail Sales by 2.70% when comparing June 2016 to June 2015…..and that was following an increase of 3.6% for May 2016 to May 2015! As you may realize, in Canada, the year-over-rear change in Retail Sales compares the aggregated sales of retail goods and services during a certain month to the same month of the previous year.  The latest data from Statistics Canada show that total Q2 2016 Canadian retail sales were up 3.6% year-over-year on a not seasonally adjusted basis.  However, even that was well off from the 5.6% increase for the first quarter of the year, so some economists say it appears retail sales growth is slowing down.  On the other hand, the 3.6% Q2 increase was still higher than any other quarter last year (2015).  Hence, it may be that the retail surge at the start of 2016 was an anomaly, and things are now unsurprisingly cooling off a bit.  If that is the case, at least retail sales growth appears to be settling in at a relatively favorable level.  The bottom line is total retail sales are up 4.5% after the first 6 months in 2016, which is a significant improvement on the 1.7% annual gain realized for all of 2015.

“….e-commerce x CA + UK = $$”

One of the newest “trends” in ecommerce business for new international Sellers is using Canada as a “Beta-Test,” model for other international markets.  When you consider that the UK has a population roughly twice the size of Canada’s, it makes sense to consider the other benefits of “beta-testing,” your international model on our closest neighbors to the North.

By setting up your international model as a Global Seller to “cut its teeth,” in Canada, you can “R&D” your sales platform in a more painless fashion.  While still learning to deal with international shipping, foreign exchange currency, foreign tax rates, customs, foreign customer service demands and different times zones (in many cases)…….you are able to do these things while still communicating in the English language and in a close enough geographic proximity to allow you to solve customer service problems (damaged, lost and incorrect orders) in a quicker (and less expensive) fashion!  Once you have honed your international sales system so as mistakes are at a minimum…….leapfrogging across the pond to your next international market that shares many of the same similarities is logical and relatively simple execution.

Hence, the “Crib Notes,” version of this article is simple.  If the UK (and eventually other European markets) is your ultimate goal, then consider testing your international model with customers in Canada.  You get all of the experiences of selling in a foreign country without the challenges associated with Greenwich Mean Time.

Country, Uncategorized

There is more to France than Great Wine and Amazing Food…..

Viva La France!

There is more to France than Great Wine and Amazing Food…..

Metropolitan France is known as “L’Hexagone,” and it is an ideally situated, diverse and prosperous export market for US based companies.  It can also be the perfect stepping stone into other Eurozone markets.

France is the world’s fifth largest economy and as such commands the second largest consumer oriented market in Europe with just over 66.6 million inhabitants.  France is also a geographical hub for business within the European Union….as well as Africa and the Middle East.  With a diversified economy where services generate as much as 80% of their Gross Domestic Product (GDP), the French economy also supports world class industrial sectors.  This includes Europe’s largest aerospace and nuclear industries, its second largest agri-food and chemical industries and its third largest information and communications technology (ICT) and pharmaceutical sectors.

French consumers have continued to embrace on-line product sales demonstrated by an almost 25% average increase in the number of transactions each of the last few years.  While the total amount of each shopping cart sale has decreased slightly over the same period, this is because French ecommerce customers are willingly placing smaller, but more frequent orders.  These consumers seem to be predominantly purchasing products from numerous categories including fashion, travel, home furnishings, electronics and other high-tech type products.

“The French are Open and Curious Consumers.”

The average French ecommerce consumer is willing to visit multiple sites to search for the product of their choice.  They are not averse to exploring multiple websites nor are they so loyal to one ecommerce portal that they will exclusively buy from it. The most successful and fastest growing of these marketplaces are listed below:

  • Amazon.fr
  • Ebay.fr
  • RueDuCommerce.com
  • LaRedoute.fr
  • PriceMinister.com
  • Pixmania.fr
  • Fnac.fr
  • Cdiscount.com

As you visit these sites you will you find several key points they have in common.  First, they all are heavily translated into the French language.  Even though most French are able to understand English to a degree, they prefer to do business in their native tongue.  Second, very seldom will you find any denominations other than the Euro reflected in any pricing. Third, most of your customer service interactions will need to also be in the French language, whether this be in written from or verbally. Finally, don’t be surprised if from time to time your company is contacted by an ecommerce customer from France to see if you will match a price found on another marketplace website.  The French are not timid when it comes to their efforts to find a “great deal,” on the internet.

While it is true that the aforementioned ecommerce websites represent the “Top-8” marketplaces for consumer sales in France, it is also true that Amazon is still the “big dog,” when it comes to the majority of online business.  Having said that, many analysts believe that the “brick & click,” players will continue to grow their market share, particularly in terms of their “click & collect,” services.  In France (as well as other European countries) it is considered a considerable advantage for an ecommerce buyer to be able to shop an online website to secure the best quality product at the best overall price, make the purchase and then visit a local warehouse to actually pick up their product within minutes (or have it couriered immediately to them)…..if they choose to exercise that option.

It is suggested that if your company wishes to really drive product into the French market, you should consider not just drop-shipping your wares to individual consumers, but you may also think about supporting inventory at a fulfillment center “in country” that will allow your customer the option of “click & collect.”  Even if such an option for your customers does not generate a large “up-tick” in sales, it demonstrates to your client base that your company is committed to a long term relationship with the French people and that you are a large, well established business.

Viva La France!

France is one of the biggest ecommerce countries in the world today.  It is ranked as the sixth biggest ecommerce market worldwide and in Europe, only Germany and the United Kingdom is bigger.  France’s online retail market exceeded 65 Billion Euros at the end of 2015.  It is expected that online sales will exceed 10% of total retail sales for the French economy at the close of 2016! Expectations are that this market will only continue to grow as more prospects gravitate to ecommerce as a mainstream shopping model.  Of the 66+ million people in France, fully 86% of them are internet users……which represents a tremendous potential for online buying.

While currently only 49% of ecommerce customers in France purchase international products, this percentage is steadily increasing as statistically demonstrated over the last three years.  The top three countries that French consumers order from are the United Kingdom, Germany and the United States. The top three delivery methods for internet orders in France are home delivery (83%), Pick-up point (66%) and Collect in Store (26%).  Of the three delivery methods, collect in store is the fastest growing through 2015.

One of the main challenges online retailers will face in the future is the huge amount of data available to offer consumers a personalized experience.  Fully 54% of French consumers confirm that a more personalized shopping interface would encourage them to buy more and to return more to that same Seller.  Another point that Sellers should consider is the three main buying criteria that French consumers consider to be most important; delivery, price and product. Finally, the decrease in the cost-per-click  (-4.5%) and the increase in click-through-rate in Europe in general and France specifically (+14%) as of the end of 2015 indicates that this is the right time for online retailers to both invest in online advertising and to further pursue the French marketplace.  It is said that old alliances die hard, and when you consider that France is the United States oldest ally, then it stands to reason that online US based Sellers should plan on selling to France a long time……..or as they say on that side of the pond, Viva La France!

 

Business, EcommerceLeave a comment

Amazon…..It’s a Jungle Out There Especially With This New Policy!

Amazon…..It’s a Jungle Out There

Especially With This New Policy!

Last week, Amazon quietly implemented a new policy and procedure specifically for the process known as “Brand Gating.”    The motivation for these new rules is indeed noble and no doubt have the consumer’s best interests at heart.   However, the way Amazon communicated this message to their Sellers left plenty to be desired.  In fact, many Sellers were never formally informed of these changes and only found out about these new rules when they tried to upload a product listing only to find they were blocked from doing so.

While most established Amazon Sellers have now been informed about these new policy changes, some of you may still be finding out about this major change only now in this article.  So what is this new policy emerging from the dark and foreboding jungles of the Amazon?  It is a procedure that requires Sellers to supply invoices and pay a fee to sell certain big brands on the Amazon website. Before we get into the specifics of these new rules, lets’ explain why Amazon felt the need to implement such cumbersome rules and hefty fees.

Amazon Products- NO COUNTERFIET ITEMS ALLOWED!

As complaints from consumers have started to inundate seller forums, Facebook Groups, consumer blogs and the internet in general about counterfeit products being openly bought and sold on Amazon, the Seattle based company had no choice but to try and crack down on these “knock-offs.”  Over the last few years more and more of these counterfeit products (mostly from Chinese manufacturers) have created complaints from both the customers who unwarily purchase them as well as the legitimate product manufacturers they impact.

How to address these concerns?  Well Amazon will now require big brand resellers to prove that their products are coming from legitimate sources.  The conventional wisdom is that Amazon will clean up their site by dumping the Sellers’ who are knowingly marketing counterfeit products.  They will now require the Seller to provide invoices showing the purchase of at least thirty (30) products over the previous ninety (90) days from the legitimate manufacturers of those products.  Once they have completed that process, they will then need to remit a payment to Amazon for authorization to sell that specific brand.  Those “Brand Gating,” registration fees will range from $1,000 to $1,500 per brand.

For many sellers, this is the time of year when they begin to load up on inventory as they prepare for the Holiday shopping season.  These new rules from Amazon could severely impact many of those Sellers.  Of most concern with these new policies is how it will affect Sellers who base their business model on what is called the “grey market.”  This is where Sellers will buy items in bulk from clearance and liquidation sources and then add their margins to these products before listing them on Amazon.  This means that typically, the Seller will not be able to produce invoices from the designated manufacturers and/or distributors…..even though the products in question are typically authentic.  It is yet to be seen how this new policy will impact what has generally been a thriving business on Amazon, namely the product clearance/liquidation model.

Current Amazon Sellers Will be Grandfathered in………

The good news for current or established Amazon Sellers is that for them it is business as usual, at least for the time being.  The registration fees will only be applied to new merchants bringing the big brand products on to their website.  Amazon Spokesman Erik Fairleigh provided CNBC.com the following written communication clarifying this part of the new policy:

“If a seller is already selling brands on Amazon that are now subject to a fee,

they are not required to pay the fee to continue selling those brands.  The fee only

applies to new sellers of particular brands.  Sellers can see whether a product

requires a fee to sell when they search for that product using the

“Add a Product,” tool on Seller Central.”

Questions still exist regarding the new “Brand Gating,” policy for existing Sellers.  As mentioned earlier, will they have to provide the invoices for all of their affected products to continue selling them?  It appears that such a clarification regarding those items will be notated when the Seller attempts to add a product through the Seller Central portal.  No doubt Sellers will feel a bit of anxiety each time they go through the process of “on-boarding” a new product for the foreseeable future.

This new policy also creates other dynamics that will play out going forward.  The argument could be made that these new rules will help established Sellers from a business sense.  Obviously, this new policy will impact the number of new Sellers who are attempting to enter the Amazon marketplace with authentic brands for the first time.  Less competition means stronger margins for established Sellers who were already selling these brands on Amazon.

As Ari Levy, a Senior Tech Reporter for Twitter explained it, “Amazon CEO Jeff Bezos is in a tough spot.  The troublemakers have found so many ways to sell knock-offs and manipulate rankings that his company can’t keep up.  As Amazon chases down the counterfeits, long-time sellers are getting hit with suspensions and being forced to take down listings.”

Established Amazon Sellers while relieved to know the new fees will not apply to them will still be somewhat nervous about other new policy and procedure changes that may be in the offing they will have to deal with.  Of course, no one ever said navigating the Amazon was not fraught with peril!