TRD Issue 69 - Briefing: Inflation Persists, Amazon's AI Woes, Ikea's Small Store Strategy, Adastria's Record Profit

Hello Subscribers,

Inflation continues to be a thorn in the side of consumers, with the CPI rising 0.4% in March and annual inflation hitting 3.5%. The Fed's cautious outlook suggests that the road back to 2% inflation may be a long one.

Amazon's "Just Walk Out" technology isn't as automated as we thought, relying heavily on human contractors. This highlights the problem of "AI washing" and the need for clear communication about these technologies.

Retail giants like Ikea are adapting to changing consumer preferences with smaller, more convenient stores that complement their larger locations—over 70 new Ikea locations launched globally in 2023, many in this smaller format.

TikTok is taking on Instagram with a new photo-sharing app, TikTok Notes. At the same time, Meta's X (formally Twitter) rival, Threads, is preparing for its API launch in June and recently recruiting beta testers.

Japanese apparel company Adastria thrives through diversification, including B2B business and collaboration with Ito-Yokado. Their goal to become a "platform developer beyond retail" reflects a broader industry shift.

There's plenty more to explore in this week's newsletter. We'll be back in our next issue with more insight. Happy reading!

The Retail Direct

About 91APP

Founded in 2013, 91APP is the premier OMO (online-merge-offline) SaaS company, providing one-stop omnichannel retail solutions in Taiwan, Hong Kong, and Malaysia. It offers advanced Commerce Solutions and Marketing Solutions that enable retail brands to penetrate the D2C (Direct-to-Consumer) e-commerce market and drive operational benefits to their full potential. In 2021, 91APP became the first SaaS company to be listed in Taiwan and has been named one of Taiwan's "NEXT BIG" companies by Startup Island TAIWAN.

For more information about 91APP (TWO: 6741), visit www.91app.com.

Economy

Consumers Feel Pinch as Inflation Remains Elevated for Third Straight Month

Why it is important

• Persistent high inflation impacts consumer purchasing power, affecting everyday life and economic stability.
• It may take longer than expected to bring inflation back to its target of 2%.

What happened

• The Consumer Price Index (CPI) increased by 0.4% in March, with annual inflation at 3.5% and core CPI at 3.8%.
• Persistent high inflation suggests the Federal Reserve's 2% target may be challenging to achieve soon.
• Federal Reserve Chair Jerome Powell's cautious inflation outlook has led to adjustments in financial markets and expectations for rate cuts.

Source: Axios

Retail

Amazon's AI Stores Seemed Too Magical. And They Were.

Why it is important

• The report highlights the disparity between public perception of AI's capabilities and its potential in commercial settings.

What happened

• According to The Information’s report, Amazon's "Just Walk Out" technology, which facilitates checkout-free shopping, relied significantly on over 1,000 contractors in India rather than being fully automated.
• Amazon is rolling back Just Walk Out at Amazon Fresh stores, shifting to smart shopping carts.
• The revelation underscores a broader industry practice where companies use human labor to train or operate systems advertised as AI-driven, sometimes referred to as "pseudo AI" or "AI washing."

Source: Bloomberg

Why Nordstrom & Macy’s are Considering Going Private

Why it is important

• Retail companies are considering privatization to implement transformative strategies without immediate scrutiny of public investors, involving significant upfront costs and more extended periods for seeing returns on investments.

What happened

• Nordstrom and Macy's, two major department store chains, are reportedly considering taking their companies private to escape the pressures of quarterly financial expectations and focus on long-term business strategies.
• Challenges associated with going private include limited access to capital, potential issues with talent retention, and uncertainty among management and employees.

Source: Modern Retail

Ikea is Growing Bigger By Going Smaller

Why it is important

• Large retailers like Ikea are adapting to the evolving consumer preferences for convenience and quick access.

What happened

• Ikea is implementing a new strategy by opening smaller stores, about 2% the size of traditional Ikea warehouses, focusing on the most popular products and including areas for planning and online order pickups.
• These stores do not replace larger Ikea locations but complement them by offering accessibility and convenience, especially for those who plan their purchases or pick up online orders.
• Over 70 new Ikea locations were launched globally during the 2023 fiscal year, with many being small stores or plan-and-order points.

Source: Axios

e-Commerce

‘I’M Not Freaking Macy’s’: Sellers React To Mercari's New Return Policy and Fee Structure

Why it is important

• Policy changes impact small businesses and individual sellers in marketplaces, and implementing a liberal return policy is challenging.

What happened

• Mercari, a secondhand marketplace, has eliminated selling fees and allowed returns for any reason.
• Some sellers are unhappy with these changes and have expressed concerns on social media platforms and even set up a petition on Change.org, which has gained over 800 signatures.
• Mercari has temporarily waived the new direct deposit fee and refunded fees charged since the policy change in response to seller complaints. However, some sellers have adjusted their strategies to maintain profitability.

Source: Modern Retail

D2C

Nearly Half of Levi’s Sales are Happening Online and in Its Shops, a Shift as Department Stores Fade

Why it is important

• Levi’s heavily invests in direct-to-consumer (D2C) and is seeing significant results, while Nike decided to reintroduce wholesalers last year.

What happened

• Levi Strauss is shifting towards D2C, which now accounts for 48% of its total sales, indicating a move away from traditional reliance on wholesalers.
• Despite a net loss of $10.6 million for the quarter, the company's adjusted earnings were above expectations, leading to an increased full-year earnings guidance.

Source: CNBC

Social

TikTok’s Instagram Competitor Likely to be Named TikTok Notes

Why it is important

• TikTok's expansion into photo-sharing introduces significant competition for Instagram and reflects the strategy to diversify its content formats, potentially increasing its user base and engagement.

What happened

• TikTok is developing a new app named TikTok Notes, intended for photo-sharing, positioning it as a competitor to Instagram.
• This move is part of a broader competition with Meta, as both companies enhance their platforms with new features like vertical-first videos and extended video uploads.

Source: Tech Crunch

Meta’s X Competitor Threads Invites Developers to Sign Up for API Access, Publishes Docs

Why it is important

• Threads' API access and documentation pave the way for developers to create apps and integrations, potentially expanding the platform's ecosystem and user engagement.

What happened

• Meta's Threads is preparing for its API's public launch in June by releasing developer documentation and a sign-up for API access.
• Threads imposes a limit of 250 API-published posts and 1,000 replies per 24 hours to prevent spam, with beta testing by notable social tool developers like Sprinklr and Hootsuite.
• Despite integration efforts with the fediverse, the API does not allow toggling fediverse sharing.

Source: Tech Crunch

Asia

Adastria Achieves Record Profit for Fiscal Year Ending February 2024 and Starts Supplying to Ito-Yokado

Why it is important

• Adastria's diversification strategy, including B2B business and collaboration with Ito-Yokado, showcases its adaptability in the competitive apparel industry.
• The company's record-high profits and strong performance demonstrate the effectiveness of its multi-brand strategy and e-commerce initiatives.
• Adastria's goal to become a "platform developer beyond retail" reflects a shift in the industry towards providing comprehensive consumer experiences.

What happened

• Adastria reported a 79% increase in net income to 13.5 billion yen (87 million USD)  for the fiscal year ended February 2024, a record-high profit. Its mainstay brands, "Global Work" and "La Colle," drove strong performance, with comparable store sales increasing by 9.1%.
• EC growth and social media engagement contributed to Adastria’s success, with EC sales accounting for 28.3% of total sales.
• Adastria launched "FOUND GOOD" for Ito-Yokado stores, aiming to offer affordable and fashionable products to customers in their 30s to 50s. It plans to expand "FOUND GOOD" to half of Ito-Yokado stores by June 2024.

Source: NIKKEI

Tokopedia, TikTok Shop Have Completed Back-End Integrations

Why it is important

• The merger positions “Shop | Tokopedia” as a strong competitor in Indonessia's e-commerce market, with the potential to capture a significant share of the country's growing online retail sector.
• The integration process and regulatory compliance showcase the importance of adhering to local regulations and government requirements in cross-platform collaborations.

What happened

• TikTok Shop and Tokopedia integrated their back-end systems as of March 27, resulting in the Shop | Tokopedia brand. 
• All e-commerce activities on Shop | Tokopedia, including payments, ordering, and transactions, are now entirely on Tokopedia's electronic systems.
• TikTok fulfilled the requirements to reverse its ban in Indonesia, including establishing a new entity, obtaining an e-commerce license, and creating a standalone TikTok Shop app. Indonesia's Ministry of Trade will audit the integration process after four months to ensure regulation compliance.

Source: Tech in Asia