On April 2, the company’s board announced that a preliminary investigation indicates that the “aggregate sales amount associated with the fabricated transactions from the second quarter of 2019 to the fourth quarter of 2019 amount to around RMB2.2 billion ($314 million).” Luckin’s stock price crashed.
Dots to connect: more scrutiny for US-listed Chinese companies, investigations into underwriters / lawyers / equity research analysts / auditors, trust issues, the need for Citron & short-sellers, fundamental value of this coffee chain business, internal governance for corporates in China, etc.
Uber is best-known as a ride-hailing company, the first of its kind in the new generation of gig-economy.
As the company grows, Uber has expanded into other areas, including UberEats.
Ride-hailing, in some way, is delivering people. UberEats, similarly, is delivering food.
Contrast to previous giants that create delivery systems with their own capital & employees, Uber is marching into this playground by facilitating the supply and demand, whether it’s people, food or other things.
During the current coronavirus pandemic, it has become more clear that moving people around is not the fundamental mandate of Uber; but matching the supply and demand is.
Consumers are increasingly using food delivery, grocery delivery and other tools to remain at home. No-contact delivery options have become popular.
As of the beginning of 2018, Amazon’s freight shipping arm has shipped over 5,300 shipping containers from China to the United States. Amazon provides either simply the trans-Pacific portion of the trip or end-to-end service for companies that want it. That can include pick-up at the factory door in China, shipment across the Pacific to a U.S. port, and trucking to Amazon fulfillment centers in the United States. Amazon Logistics and Beijing Joyo have published rates in their publicly accessible tariffs that describe the types of services and fees that their clients can utilize.
Amazon embarked in earnest on building its own last-mile network after UPS failed to bring orders to customers in time for Christmas in 2013, costing Amazon millions of dollars in refunds. [WSJ]
In 2018, Amazon ordered 20,000 Mercedes-Benz vans from Daimler. Since developing its own delivery network in 2018, Amazon .has built up a fleet of 30,000 last-mile delivery trucks and vans. As of Dec 2019 Bloomberg’s report, it has more than 800 delivery contractors in its last-mile network employing 75,000 U.S. drivers.
Amazon also has announced plans to order 100,000 battery-powered delivery vans from Rivian Automotive, an electric car-making venture it purchased a stake in earlier this year. The first of those battery-powered vans will hit the road in 2021.
Prime Air, the Amazon-branded planes, first debuted in Aug 2016. It first plane is a Boeing 767 owned by Atlas Air that had been converted into a freighter. Amazon announced deals with two aircraft leasing companies — Atlas, and another called Air Transport Services Group, or ATSG — in May 2016 to fly as many as 40 dedicated cargo planes over the next two years. [recode]
Atlas Air will be phasing in 20 Boeing 767-300s to carry Amazon’s freight, under the terms of a 10-year lease and a seven-year maintenance and operation contract. ATSG says its air services will eventually operate just as many planes for Amazon: 12 Boeing 767-200s that are covered by five-year leases, plus eight 767-300s with seven-year leases. [geekwire]
Source: recode
In May 2019, the main Air Hub at the Cincinnati/Northern Kentucky International Airport broke ground. Amazon will invest $1.5 billion. It can park 100 cargo jets and will open in 2021.
“These new aircraft create additional capacity for Amazon Air, building on the investment in our Prime Free One-Day program,” said Dave Clark, Senior Vice President of Worldwide Operations at Amazon. “By 2021, Amazon Air will have a portfolio of 70 aircraft flying in our dedicated air network.”
Amazon has been steadily growing its logistics operation over the last decade, and it now delivers more than half of all Amazon packages in the US. “Our AlphaWise analysis shows that Amazon Logistics already delivers ~50% of Amazon US volumes, focused on urban areas,” Morgan Stanley said.
Share of Amazon Packages | Source: WSJ
Amazon needs to deliver about 5 billion packages per year. Amazon Logistics delivers about 20% of its U.S. package volumes from a year ago and is now shipping at a rate of 2.5 billion per year.
MS estimates UPS and FedEx have U.S. shipping volumes of 4.7 billion and 3 billion packages per year, respectively.
By 2022, Amazon Logistics will reach a volume of 6.5 billion packages per year , far exceeding its estimate for UPS at 5 billion packages per year and FedEx at 3.4 billion packages per year.
FedEx and UPS
In its 2018 annual report, published in Feb 2019, Amazon counted companies in “transportation and logistics services” among its rivals. “They had never done that before that day,” Mr. Smith (Founder, Chairman & CEO of FedEx) said. “So we took it seriously.”
While FedEx is walking away from the largest e-commerce player in the U.S., FedEx is positioning itself as a go-to carrier for Target Corp., Walmart Inc. and the world of retailers that aim to compete with Amazon. [WSJ]
Meanwhile, UPS has been investing heavily to expand its capacity to handle more packages for Amazon and other shippers. UPS reported a surge in the volume of packages going through its air network in the June quarter. [WSJ]
Further, in the 2019 holiday season, Amazon blocked its third-party sellers from using FedEx’s ground delivery network for Prime shipments, citing a decline in performance heading into the final stretch of the holiday shopping season.
for company-owned stores: close seating areas, focus on delivery, drive-thru and walk-in take-out
for franchisees: strongly encouraged to adopt similar operations procedures; the guidance is supported by franchisee leadership and is expected to be adopted by the majority of franchisees
most crew members with scheduled shifts will be redeployed to support serving customers in the Drive-Thru, carry-out and McDelivery
working with franchisees around the world in order to promote financial liquidity (e.g. rent deferrals) during this period of uncertainty
providing two weeks of paid leave for employees of company-owned restaurants who are impacted by the virus (announced on March 10)
franchisees and partners around the world are are supporting first responders, hospital and healthcare workers with free food and/or drinks in recognition and support of the work they are doing to help others.
In the U.S., some franchisees are providing free lunches to children dependent on free school lunch programs where school is closed, others are providing free meals to healthcare workers and a franchisee in the Midwest is offering up their parking lots for Blood Drives
Across Europe, many markets are providing free drinks, coffee and meals to first responders and healthcare workers on the front lines
In Guatemala, the restaurants are providing food to workers who are constructing temporary hospitals to support treatment of those diagnosed with COVID-19.
In the Philippines, we will be providing food to medical health workers, NGO volunteers and parts of the population that are experiencing challenges accessing food
entered into a 364-Day Revolving Credit Agreement dated as of March 25, 2020; and borrowed the full $1 billion committed amount available under the Agreement
On March 27, 2020, McDonald’s issued an aggregate principal amount of $3.5 billion of medium-term notes, pursuant to the existing medium-term notes program filed with the SEC and effective on July 27, 2018
Starbucks China was able to start re-opening doors again. On March 5, the company announced 90 percent of the stores are open again, operating under modified hours and conditions
During the month of February, Starbucks China’s comparable store sales were down 78% versus the prior year
In the last fiscal week of February, relative to the prior week, average daily transactions per store improved 6% and total weekly gross sales in China grew 80%, reflecting the reopening of stores. In that last week, Starbucks China’s mobile orders accounted for approximately 80% of sales mix, with 30% Mobile Order & Delivery and 50% Mobile Order & Pay.
currently estimate that comparable store sales in China for Q2 FY20 will be down approximately 50% versus the prior year. Therefore, we expect a COVID-19-related headwind of approximately $400 million to $430 million to China’s revenue in Q2 FY20 versus prior expectations.
First confirmed case: late last night (March 5), we learned one of our store partners at our 1st & University store in downtown Seattle was diagnosed with COVID-19 and is self-isolating at home for a period of time.
closed the store and initiated a deep clean overnight, following all recommended guidelines from the City of Seattle and King County public health authorities
these officials have encouraged us to reopen the store after further preventative cleaning, which we have already conducted, staffed by partners who have no known impact from COVID-19
look forward to welcoming our customers back very soon
temporarily expanding catastrophe pay for COVID-19 partner care, in addition to benefits like sick pay, vacation pay or personal time off as available. Any partner who has been diagnosed with or exposed to COVID-19, or comes in close prolonged contact with someone in their store or household who has, is eligible for up to 14 days of catastrophe pay – whether or not they are showing symptoms
if have not had any known contact with someone diagnosed with COVID-19, but are showing symptoms, partners should stay home until remaining symptom-free for 24 hours. Can use temporary, expanded catastrophe pay for any scheduled shifts over a three-day period, and then similarly use additional benefits like sick pay, vacation pay or personal time off
certain individuals may consider taking extra precautions. Should they choose to self-isolate, are also eligible for up to 14 days of catastrophe pay with a doctor’s noted recommendation
The CUP Fund, started by partners, is always available. The fund is for partners to use when facing an unexpected financial hardship.
Starbucks is matching 50 cents for every dollar of partners’ donation
Other free mental health/counseling programs, including Employee Assistance Program, Headspace
as we navigate this dynamic situation community-by-community and store-by-store, we may adapt the store experience by limiting seating to improve social distancing, enable mobile order-only scenarios for pickup via the Starbucks App or delivery via Uber Eats, or in some cases only the Drive Thru will be open
we will close a store if we feel it is in the best interest of our customers and partners, or if we are directed to do so by government authorities
completed a public offering pursuant to an underwriting agreement, under which Starbucks agreed to issue and sell to the several underwriters (i) $500,000,000 aggregate principal amount of its 2.000% Senior Notes due 2027 (the “2027 Notes”), (ii) $750,000,000 aggregate principal amount of its 2.250% Senior Notes due 2030 (the “2030 Notes”) and (iii) $500,000,000 aggregate principal amount of its 3.350% Senior Notes due 2050 (the “2050 Notes” and, together with the 2027 Notes and the 2030 Notes, the “Notes”)
Starting today, we will move to a “to go” model across the U.S. and Canada for at least two weeks to help prevent prolonged social gathering
pausing the use of all seating
Café, Mobile Order & Pay, Drive Thru and Delivery will still be open
temporarily closing company-operated stores in high-social gathering locations like stores that are located inside malls or on university campuses
In communities such as Seattle and New York with high clusters of COVID-19 cases, we will reduce operating hours or temporarily close select stores
investup to $10 million in the CUP fund
temporarily expanding the Care@Work program to provide support for partners needing additional backup childcare options as a result of school closures.
Today, we are making the decision to close access to our cafés altogether for two weeks and limiting our services to Drive Thru and delivery only.
Some exceptions will be made for those cafés serving in or around hospitals and health care centers in our efforts to serve frontline responders and health care workers.
changes apply to company-operated stores in the U.S. and Canada; licensed partners will make decisions for their properties
Delivery continues to be another option from those Starbucks locations still open through Starbucks Delivers in markets across the United States and Canada through the Uber Eats app.
To pay all store partners for the next 30 days, whether come to work or choose to stay home
for stores in or around hospitals, or communities with limited food options, will remain open with partners who are explicitly choosing to continue to serve
continue to work very closely with local, state and the federal government to continually assess how best to stay open, stay safe, and be part of the solution during this time
partners in every region around the U.S. and Canada showed up before dawn to open drive-thru-only experiences at their stores. They filled in for each other at short-staffed nearby stores. Stores that could open, did.
The year 1952 brought a separation of airline subsidies from airmail. The Post Office Department paid airmail compensation and the Civil Aeronautics Board made all airline subsidy payments, based on national interests aside from airmail.
The needs of passenger traffic overtook those of mail cargo in the second half of the 20th century. Airline companies organized their routes to maximize passenger needs. By 1975, airmail had become a fundamental part of the U.S. Postal Service’s transportation plan. That October, first class mailers no longer had to pay an extra fee for airmail service.
FedEx
In 1971, Smith incorporated Federal Express with his college idea of an integrated delivery system specifically designed to accommodate time-sensitive shipments with airfreight as the core.
Postal system has its political importance, which is why it’s included in the constitution. As the US expanded, how information / news / mails were transmitted were directly influencing the limit of a united society.
On July 7, 1838, Congress declared all railroads to be post roads and enabled the railways to make contracts as long as sending mail by rail cost no more than 25 percent above transporting it by stagecoach.
But it’s the industrialization that enabled the US to include / connect California and other lands that are far away from the initial states.
In 1848, US acquired California at the end of the Mexican War. Under the Treaty of Guadalupe Hidalgo, Mexico also recognized the U.S. annexation of Texas, and agreed to sell California and the rest of its territory north of the Rio Grande for $15 million plus the assumption of certain damages claims.
In November 1848, Postmaster General Cave Johnson dispatched a special agent to California to establish Post Offices. By Christmas, steamships were carrying mail from New York to California via the Isthmus of Panama. This was before the construction of the canal. When the ships reached Panama, the mail was taken off and transported in canoes or on pack animals – and later by railroad – about 50 miles to the Pacific coast. Another steamship collected the mail on the Pacific side and headed north.
The first U.S. Mail traveled to California by steamship, via the Isthmus of Panama, in 1848 | Source: USPS
Congress authorized funding for the overland routes not because they brought any financial profit to the Post Office Department or the federal government, but because they helped build and bind together a nation.
Also briefly mentioned in 一朝风雨一代王：Sears, Walmart, Amazon, the expansion of the US rail transportation contributed to the growth of USPS (Post Office Department at the time).
Source: gorhistory.comSource: gorhistory.com
In 1862, mail was sorted en route, as a train moved between two points, using converted baggage cars.
By the early 1900s, railroads were critical to postal operations. Like Union Station in Washington, D.C., located adjacent to the City Post Office Building, the Post Office Department ordered that all new main post offices in large cities be built as near as possible to the principal railroad station.
When the current coronavirus (COVID-19) hit the world and people prepare to stay at home for weeks, some of the social infrastructures are receiving increased attention.
The delivery system is a very good one to start. As uber not only provides uberEATS but also grocery delivery, Walmart / Target / CVS increasingly focus on delivery, etc., I will try to review the development of US delivery system recently and what is implied for the future.
Pre-industrialization: The Origin And Natural Power
The origin of United States Postal Service (USPS) can be dated back to 1775 when Benjamin Franklin was promoted as the first postmaster general.
In 1778, the US Constitution, Article I, Section Eight, known as the Postal Clause, says “The Congress shall have Power to establish Post Offices and post Roads”. This explains the importance of the postal system and its position as a government branch nowadays.
In the early days, mails were mainly carried by manpower and horsepower. In 1785, the Continental Congress authorized the Postmaster General to award mail transportation contracts to stagecoach operators, in effect subsidizing public travel and commerce with postal funds. Despite their higher costs and sometimes lower efficiency, stagecoach proposals were preferred over horseback.
The Philadelphia Stage Coach (about 1800) | Source: https://peterpappas.com
Below is the chart for Jumia’s performance in terms of GMV.
A spike in 2018Q4 just before IPO is controversial..
Although with the “artificial” growth in 18Q4, the trend looks good
The more worrying part is the slowdown in GMV growth – especially when Jumia is still has a long way to go
Jumia’s full year 2019 GMV is €1.1 billion, up 33% compared to 2018.
Comparatively, Pinduoduo’s GMV in the twelve-month period ended December 31, 2018 was RMB471.6 billion (US$268.6 billion), an increase of 234% from RMB141.2 billion in the twelve-month period ended December 31, 2017.
Combined with Jumia’s annual active customer base, we can see the GMV per AAC declining over time.
In its Q4 press release, Jumia says “we have reduced promotional intensity and consumer incentives on lower consumer lifetime value business. While most product categories experienced GMV growth in the 20 to 50% range, phones and consumer electronics contracted by approximately 20% on a year-over-year basis. This aspect of the business mix rebalancing will likely continue to negatively impact GMV development over the next two quarters.”
Source: Jumia 2019Q4 Presentation
“…we have increased our focus on everyday product categories such as Fast Moving Consumer Goods (“FMCG”), fashion, beauty and personal care as well as digital services which provide affordable entry points into the Jumia ecosystem…”
We could also see that Pinduoduo’s GMV per active buyer is a little bit insane..
approx. annual GMV per active buyer = $268.6 billion / 418.5 million = $641.8
Jumia is at ~€180 in 2019, using annual GMV divided by ending AAC.
To compare it with consumers’ e-commerce purchase across the globe..
