Some common bias/problems
Sharing an except from Nike founder Phil Knight’s book Shoe Dog:
“…when he [Johnson] wasn’t selling, he was beaverishly building up his customer data files.
Each new customer got his or her own index card, and each index card contained that customer’s personal information, shoe size, and shoe preferences. This database enabled Johnson to keep in touch with all his customers, at all times, and to keep them all feeling special. He sent them Christmas cards. He sent them birthday cards. He sent them notes of congratulation after they completed a big race or marathon. Whenever I got a letter from Johnson I knew it was one of dozens he’d carried down to the mailbox that day. He had hundreds and hundreds of customer-correspondents, all along the spectrum of humanity, from high school track stars to octogenarian weekend joggers. “
This where Nike’s superior customer relationship management came from… two years after Nike was founded.
More recently, Nike’s SNKRS app launched in 2015 was a hit. The app is where many head for a chance to get Nike limited releases and special products.
It’s become Nike’s latest way to game supply and demand of hyped products. SNKRS keeps shoppers hungry by sending out regular push notifications about drops every week. When consumers inevitably flood the app for the release, many take an L, walking away empty handed. A share of those who do get the shoes never wear them. Instead, they immediately resell them for multiples of what they paid, fueling the burgeoning resale market. [Quartz]
And Nike just launched Chinese version of its Nike App in November, with Nike Fit and Nike App Retail expected to launch next year in China.
In the US, as top merchants getting bigger, they are able to drive the adoption of cash-like mobile wallets, internalizing more transaction infrastructure, cutting payment networks’ growth & profitability.
We have already seen the success of Starbucks’s mobile order & pay, launched at the end of 2014. The combination of its mobile app, (gift) cards and cash-like value in the app reduces the overall transactions costs of Starbucks purchases. Other benefits like managing the loyalty program and mobile orders/pick-ups makes it the role model that big merchants (like Walmart) wants to follow.
Currently, some merchants are offering co-branded credit cards at the same time. But I think the long-term goal is to promote the usage of their own mobile app and cash (e.g. Starbucks credit card comes with an annual fee that I think is discouraging people from using the card in the long-term but can be used as a market tool for now). They can reduce (most of) the transaction costs and own the data (e.g. payment networks can only touch the reloading part of Uber Cash, but not the transactions made via Uber Cash – no fees, no data).
Alibaba raised ~$11.2 billion in Hong Kong Stock Exchange, offering stocks at HKD$176 per share. With Hong Kong exchange relaxed its rules around “one share, one vote”, Alibaba (NYSE: BABA) is able to list its shares on HKEX again. It is the world’s largest listing so far this year. The overall sum raised could rise to nearly US$13 billion if the underwriting banks exercise an option to sell 15% more shares. // WSJ
Walmart announced on Nov 21 that it plans to add 500 new stores in China over the next five to seven years. It will also remodel more than 200 stores in China over the next few years, adding features such as self-service cash registers where customers can pay using facial recognition. The company’s China sales grew 6.3% last quarter, higher than its 2.5% growth worldwide. // CNN
Kuaishou (快手), the main competitor for Douyin (Tik Tok) in China, to become the exclusive partner for 2020 Chinese New Year Gala. The Chinese New Year Gala (春晚), or Spring Festival Gala, is the most watched annual television broadcast and Kuaishou will be the exclusive partner for 2020 to send red pockets (红包) to audience. Last year, Baidu was the exclusive partner to promote the use of its digital wallet. spending over ¥1 billion in red pockets. Kuaishou has achieved 200 million DAU in 2019 and the target is 300 million. // Jiemian
WSJ – Yahoo Japan and Chat App Line Agree to Merge
As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.
Line Pay has 37 million users and PayPay, operated jointly by SoftBank and Yahoo Japan, has 19 million. (Nikkei)
Dots to connect: competitions in ads, e-commerce, payment in Japan, monetization on 82 million Line MAU, Japan moving to cash-less, SoftBank’s consolidated financial performance, new superapp, etc.
Differences in numbers:
There are other related trends in meal replacement & dairy substitutes,
insect protein and seafoods
Why now:
Full report here.
Previous post on growth in stores and per store/unit growth.
Now here are some number about the coffee market in the US.
In China, first we can find a subset of the 1.4 population by taking the ~60% between age 15-45 and ~60% in urban areas -> 500 million.
Then assuming 20% of the target 500 million customers will visit/purchase in stores like Luckin (-> 100 million) twice a week (100 cups per year) -> 10 billion cups per year.
The current average monthly transacting customers is 9 million.
Using average price of $2 per cup, the estimated market can reach $20 billion easily in 1-2 years.
And given that Luckin is expanding into other categories like cream cheese teas, fruit teas and juices, twice per week is not an overestimate.
An annualized revenue of $2 billion is only 10% of the addressable market.
Previous post on Luckin’s store counts growth.
As Luckin also reported the number of items sold, we could get the average net selling price, which is growing slowly. The discounts on items sold have already been considered in net revenue. (Free items are included in Sales & Marketing expenses).
Given that the menu prices are usually between RMB 21-27, the overall discount is still over 50%.
Another chart tho, is net product revenue per store. The number of store is averaged between the beginning and the end of the quarter. Since more stores are maturing, this figure is growing significantly.
In comparison, Starbucks International has a little bit less than $1 million per store, KFC China has a little bit over $250k per store.
Luckin Coffe (Nasdaq: LK) released its Q3 quarterly earnings last week.
More than 700 new stores opened in Q3. This might be fastest growing coffee chain in history.
Luckin grew to 3,680 stores from 9 store at the end of 2017.
You can’t even see the number for 2017 Q4 in the chart below.
BeiGene (NASDAQ: BGNE; HKEX: 06160), announced on Nov 14 that BRUKINSA™ (zanubrutinib) has received accelerated approval from the US FDA as a treatment for mantle cell lymphoma (MCL) in adult patients who have received at least one prior therapy. This is the first time that the FDA approved a drug based on efficacy data that is predominantly from China. // reuters | BeiGene
Trip.com (NASDAQ: TCOM), formerly Ctrip.com (Nasdaq: CTRP) and TripAdvisor (Nasdaq: TRIP) announced a strategic partnership on Nov 6 to expand global cooperation, including a joint venture, global content agreements and a governance agreement. TripAdvisor will own 40% of the joint venture. Trip.com shall acquire up to 6.95 million TripAdvisor shares or TripAdvisor shares valued at USD317.6 million through open market transactions within one year following regulatory approvals. Trip.com will have a nomination right for one TripAdvisor board seat commencing upon the relevant regulatory bodies’ approvals of the transaction. // TripAdvisor
Luckin Coffee (NASDAQ: LK), a coffee chain founded in 2017 in China and operating only 9 stores that year, grew to 3,680 stores at the end of 2019 Q3, with quarterly revenue expanding more than 6-fold to RMB1,493.2 million from RMB227.1 million a year ago. Also mentioned in the earnings release, Luckin “strategically launched Luckin Tea as an independent brand and developed our new retail partnership model, .. engaged in ongoing discussions with potential strategic partners to set up joint ventures in markets outside of China.” // Luckin Coffee
