Posts in category Business


ApprovedBusinessBusiness and finance

Siemens and General Electric gear up for the internet of things

IT DOESN’T take long to walk from Siemens’s old headquarters in Munich to its new one, inaugurated in June: the German industrial conglomerate has built it right next door. The design is cutting-edge, as are the building’s environmental features. It is packed with energy-saving sensors; channelled rainwater is used to flush the toilets.

General Electric, Siemens’s big American rival, will soon have a new base, too. But it takes three hours to drive from the old site in Fairfield, a Connecticut suburb, to the new one in Boston. Its building will also boast plenty of green technology, such as a huge canopy made of solar panels, as well as spaces that the public can enter, including co-working areas and lounges. There will be laboratories both for internal startups and some from outside. 

The two industrial giants aren’t so much showing off as signalling transformation. Both firms are going through the most profound change in their corporate histories, attempting to switch from being makers of machines into fully digital businesses. GE’s chief executive, Jeff Immelt, says the plan is to join the world’s top ten software firms…Continue reading

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Japanese golf courses hunt for a new driver

Slow fade

THE gold-coloured golf club priced at $4,700 that Japan’s prime minister, Shinzo Abe, gave to Donald Trump, America’s president-elect, in their first meeting last month may have been a piece of polished diplomacy. But it is unlikely to revive its posh Japanese maker, Honma, which calls itself “golf’s aristocracy”, presumably because it crafts the world’s most expensive clubs. It went bankrupt after Japan’s bubble-era splurge on new golf courses. Seven years ago a businessman from China bought the firm, hoping for an upswing.

Golf, long associated with extravagance in Japan, is flagging. Clubs have trimmed green fees as the level of golf-playing among Japanese has fallen by over 40% since a high in the early 1990s. As elsewhere, courses are in oversupply: Japan has over 2,300—half of Asia’s total.

More than 120 have closed since 2010. Entrepreneurial types have converted about 70 into solar-panel plants, encouraged by state subsidies for alternative-energy production following the disaster in March 2011 at the Fukushima Dai-ichi nuclear-power plant. A few others have been turned back into…Continue reading

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Donald Trump’s win has sent the shares of small American companies on a tear

THERE have been plenty of swings in financial markets since America’s election on November 8th. The Mexican peso has fallen against the dollar, reflecting worries about Donald Trump’s protectionist tendencies. Ten-year bond prices have tumbled as investors factor in the likelihood of much higher government borrowing. One particularly striking move has been a surge in the share prices of small firms. The Russell 2000 index of American midgets has leapt by 12%, compared with a 3% rise for the S&P 500 index of multinational leviathans (see chart).

Small companies are the backbone of America’s economy, employing about half of the private-sector workforce. But they have had a rotten decade. The Russell index had lagged the stockmarket until the election. The country’s 28m small firms—most of them unlisted—have never fully recovered from the financial crisis of 2008. As of October, confidence had yet to rise back to the level of 2006, according to an index of optimism that is based on surveys by the National Federation of Independent Business, a lobbying group. Giant firms, meanwhile, have been playing a bigger role: two-thirds…Continue reading

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France’s nuclear-energy champion is in turmoil

Under pressure

THESE are difficult times for Electricité de France (EDF), the country’s quasi-monopolistic electricity provider, serving 88% of homes. Outages at no fewer than 18 of the 58 EDF-owned nuclear reactors that provide three-quarters of France’s electricity have meant a slump in production: the company says annual nuclear output could fall to 378 terawatt hours (TWH), from 417 TWH last year. Eight reactors are currently lying idle and several may not restart for weeks or months. Power stations are burning coal at a rate not seen since the 1980s. As electricity imports and prices soar, officials are having to deny that a cold snap could bring blackouts.

The cause of the crisis—possibly faulty reactor parts throughout EDF’s fleet—suggests it may not be easily contained. France’s nuclear regulator, the Autorité de Sûreté Nucléaire (ASN), this summer ordered urgent tests of reactor parts, mostly bases of cylindrical steam generators. Inspectors are worried about high carbon levels found in steel forged by Creusot Forge, which is owned by Areva, another French firm, and by Japan Casting & Forging…Continue reading

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How companies should treat their most enthusiastic customers

THE hero of Nick Hornby’s novel, “High Fidelity”, cannot get enough of vinyl records. By day Rob Fleming runs a record shop where he spends his time sampling the stock and constructing fantasy compilations with his equally obsessive assistants. By night he moons over his favourite songs. “Is it so wrong, wanting to be at home with your record collection?” he asks himself. “There’s a whole world in here, a nicer, dirtier, more violent, more peaceful, more colourful, sleazier, more dangerous, more loving world than the world I live in.”

Rob is an example of what management gurus dub “super-consumers”, “lead consumers” or “high-passion fans”. Only a tenth of customers are super-consumers but they account for 30-70% of sales, an even greater share of profits and almost 100% of “customer insights”, says a new book, “Super-Consumers”, written by Eddie Yoon of the Cambridge Group, a consultancy.

These people are not defined simply by the amount of stuff they buy (though they tend to be heavy users), but by their attitude to the product. Like Rob, they regard the things that they consume as answers to powerful…Continue reading

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The business of reselling returned shop items

Can I send him back, too?

IN STORES and warehouses across America, they wait: towers of toys, scarves piled on scarves, box upon box of shoes. The official start of holiday shopping in America begins on “Black Friday” on November 25th. Retailers hope to sell more than $650bn of goods this season, roughly the annual economic output of Switzerland. Ideally, companies’ supply of products would precisely match demand for them. In reality millions of items will stay on shelves or get sent back after purchase—in all of 2015 Americans returned goods worth $261bn, out of a total $3.3trn sold. What happens next?

Some returned goods will be resold by the very same retailer, but many will not. By the time an item is returned it might be either damaged or stale, points out Steven Barr of PwC, an accounting firm and consultancy; shops might want to offer newer wares. And resale is not an option for the stacks of goods that are never sold at all.

For retailers and manufacturers, this is a big headache. Dealing with unwanted goods can amount to a tenth of the cost of making and distributing them in the first place. But for…Continue reading

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ApprovedBusinessBusiness and finance

The future of the A380

AT THE world’s major airports, plane-spotters often spend days waiting for the world’s largest passenger plane, the Airbus A380, to make an appearance. The nerds at Dubai International Airport are spoilt for choice. It is home to Emirates, an airline that owns 86 of the monster aircraft, almost half of the global A380 fleet. These planes have propelled Emirates from insignificance a decade ago to its position as the world’s biggest carrier (measured by international passenger mileage in 2015). Now the airline has hit a rough patch. That is bad news for Airbus, the European aerospace and defence giant which makes the A380, and for the plane itself.

Demand once seemed insatiable for flights through Emirates’ hub in Dubai, which is known in the industry as a “super-connector” airport. Now its location helps explain the airline’s difficulties as well as its spectacular past growth, says its president, Sir Tim Clark. When he helped set up the airline in 1985, he says, Dubai was “an enchanting Arab village” that generated little air traffic. Instead of filling up the planes with locals, his strategy was to use its position halfway between…Continue reading

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Donald Trump’s conflicts of interest

THE NEW Trump Tower in Worli, a buzzing district of Mumbai, looks like any building site but its marketing sells a dream. A golden structure soars to the sky alongside a picture of Donald Trump. He is—potential residents are assured—the gold standard around the globe, a dealmaker without peer who operates across the gateway cities of the world and the man who built the American dream. Until a few days ago the developer, Lodha, carried a message on its website: “Congratulations Mr President-elect”. But now that a storm has blown up over the possible conflicts of interest between the various operations of Mr Trump’s group and his new job, it has been deleted.

The self-embellished legend is of a global tycoon. In a kind of mirror image, outraged suspicion is mounting that the Trump Organisation could morph into a vast global network of cronyism. America has been treated to reports of multi-billion dollar projects across the planet, to photos of Mr Trump glad-handing businessmen and to images of exotic, Trump-branded buildings standing like monuments to the decay of American ethics. Paul Krugman, a left-of-centre economist, has suggested that the…Continue reading

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ApprovedBusinessBusiness and finance

Donald Trump’s conflicts of interest

THE NEW Trump Tower in Worli, a buzzing district of Mumbai, looks like any building site but its marketing sells a dream. A golden structure soars to the sky alongside a picture of Donald Trump. He is—potential residents are assured—the gold standard around the globe, a dealmaker without peer who operates across the gateway cities of the world and the man who built the American dream. Until a few days ago the developer, Lodha, carried a message on its website: “Congratulations Mr President-elect”. But now that a storm has blown up over the possible conflicts of interest between the various operations of Mr Trump’s group and his new job, it has been deleted.

The self-embellished legend is of a global tycoon. In a kind of mirror image, outraged suspicion is mounting that the Trump Organisation could morph into a vast global network of cronyism. America has been treated to reports of multi-billion dollar projects across the planet, to photos of Mr Trump glad-handing businessmen and to images of exotic, Trump-branded buildings standing like monuments to the decay of American ethics. Paul Krugman, a left-of-centre economist, has suggested that the…Continue reading

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ApprovedBusinessBusiness and finance

False news items are not the only problem besetting Facebook

“MARK ZUCKERBERG, dead at 32, denies Facebook has problem with fake news.” The satirical headline, which made the rounds online this week, nicely encapsulates the most recent woes of the world’s largest social network: its algorithms, critics say, filled users’ newsfeeds with misinformation—and in the process influenced the American election result. But this is not the only problem the firm is grappling with. A volatile share price, privacy policies and advertising metrics have also kept Mr Zuckerberg (pictured) busy.

“News” that the Pope had endorsed Donald Trump or that a pizzeria in Washington, DC, is the home base of a child-abuse ring led by Hillary Clinton, were not confined to Facebook (nor were fake stories only a right-wing phenomenon). They often originate elsewhere, for instance on fake-news websites in Macedonia, which make good money via online ads, and on Twitter. But Facebook’s algorithms give prominence to such misinformation. They are tuned to maximise “engagement”, meaning they present users with the type of content that has already piqued their interest, as outrageous headlines tend to do.

Yet despite…Continue reading

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ApprovedBusinessBusiness and finance

False news items are not the only problem besetting Facebook

“MARK ZUCKERBERG, dead at 32, denies Facebook has problem with fake news.” The satirical headline, which made the rounds online this week, nicely encapsulates the most recent woes of the world’s largest social network: its algorithms, critics say, filled users’ newsfeeds with misinformation—and in the process influenced the American election result. But this is not the only problem the firm is grappling with. A volatile share price, privacy policies and advertising metrics have also kept Mr Zuckerberg (pictured) busy.

“News” that the Pope had endorsed Donald Trump or that a pizzeria in Washington, DC, is the home base of a child-abuse ring led by Hillary Clinton, were not confined to Facebook (nor were fake stories only a right-wing phenomenon). They often originate elsewhere, for instance on fake-news websites in Macedonia, which make good money via online ads, and on Twitter. But Facebook’s algorithms give prominence to such misinformation. They are tuned to maximise “engagement”, meaning they present users with the type of content that has already piqued their interest, as outrageous headlines tend to do.

Yet despite…Continue reading

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ApprovedBusinessBusiness and finance

Samsung is sucked into South Korea’s political crisis

IT WAS the third raid on the Samsung group in as many weeks. On November 23rd state prosecutors combed more offices of the South Korean consumer-electronics firm, part of a probe into an influence-peddling case that could be the undoing of President Park Geun-hye’s administration. The deepening inquest compounds a miserable few months for Samsung, which recently recalled 3m faulty washing machines and killed a new line of Galaxy Note phones after dozens exploded due to flawed batteries.

Last week prosecutors accused Ms Park of conspiring to coerce 50-odd companies to funnel 80bn won ($70m) to two foundations, Mir and K-Sports, controlled by Choi Soon-sil, a confidante indicted for abuse of power. The biggest grant, 20.4bn won, came from Samsung. Prosecutors suspect that it funnelled a further €2.8m ($3m) to Ms Choi through Widec Sports, a German company she used to buy horses and equestrian lessons for her daughter, a dressage athlete.

Investigators had said that the firms, including many in the pantheon of South Korean business, such as Lotte, a retail giant, and SK Group, a conglomerate, both of whose offices were raided this week,…Continue reading

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ApprovedBusinessBusiness and finance

Samsung is sucked into South Korea’s political crisis

IT WAS the third raid on the Samsung group in as many weeks. On November 23rd state prosecutors combed more offices of the South Korean consumer-electronics firm, part of a probe into an influence-peddling case that could be the undoing of President Park Geun-hye’s administration. The deepening inquest compounds a miserable few months for Samsung, which recently recalled 3m faulty washing machines and killed a new line of Galaxy Note phones after dozens exploded due to flawed batteries.

Last week prosecutors accused Ms Park of conspiring to coerce 50-odd companies to funnel 80bn won ($70m) to two foundations, Mir and K-Sports, controlled by Choi Soon-sil, a confidante indicted for abuse of power. The biggest grant, 20.4bn won, came from Samsung. Prosecutors suspect that it funnelled a further €2.8m ($3m) to Ms Choi through Widec Sports, a German company she used to buy horses and equestrian lessons for her daughter, a dressage athlete.

Investigators had said that the firms, including many in the pantheon of South Korean business, such as Lotte, a retail giant, and SK Group, a conglomerate, both of whose offices were raided this week,…Continue reading

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Technology firms may struggle to disrupt the food business

THE office parks of Silicon Valley boast many firms that are trying to change the world. But there are plenty with more modest goals. Zume Pizza, a tiny startup that is located a few miles from the sprawling headquarters of Google, wants to redesign the way pizzas are made. Zume has programmed robots to make pizzas that are then cooked inside vans as they hurtle towards customers. Ovens are timed to finish cooking in sync with the vehicles’ arrival at their destination, so the pies are always piping hot.

In recent weeks spies from rival pizza companies and from food-delivery firms have been driving by in unmarked cars taking photographs of the office and the vans, says Julia Collins, one of Zume’s co-founders. To protect its business, the startup has patented the process of cooking food in ovens while a vehicle is moving (the patent probably gives Zume fairly defensible intellectual property, according to one patent lawyer). The company only operates in Mountain View, but has expansion plans. Since its founding last year it has reportedly raised $6m from investors, among them Jerry Yang, a co-founder and former boss of Yahoo, an early giant of…Continue reading

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The sharing economy brings tycoon lifestyles within reach of some

LAMENTING the rise of inequality is one of the few growth industries in an age of stagnation. One authority on the American wealthy, Robert Frank of CNBC, a TV channel, worries that the rich are “floating off” into their own country. Chrystia Freeland, a journalist-turned-politician, frets about the rise of the “new global super-rich” and the fall of everyone else. Charles Murray, America’s gloomiest social scientist, warns that society is “coming apart” as the rich retreat into their gated communities.

At the top of the income scale, however, a small counter-trend is observable. Never before have so many people been able to get access to the accoutrements of tycoonery—private planes, luxury yachts, fancy cars and interior-designed, exclusive homes. There is only so much comfort to be had from the fact that it is easier for the merely rich to lay claim to the lifestyle of the super-rich. But as a result of a combination of new technologies and businesses, that is nonetheless what is happening.

Tycoon living begins with a private jet. Whereas yachts are dispensable (not everyone wants to float around for weeks with the…Continue reading

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ApprovedBusinessBusiness and finance

Clash of the Tatas

COMPANY bosses who get the sack react in different ways: some quietly leave, others graciously wish their successor luck, most try to nurse hurt pride as best they can. Not Cyrus Mistry, who on October 24th was ousted as chairman of the Tata Group, India’s biggest conglomerate. Bemused and angered at having his predecessor, Ratan Tata, suddenly seize back control, he has refused to go. The schism at the heart of Tata has drawn attention to what made it possible in the first place: an overly complex structure trying to oversee too many businesses, deficient corporate governance and a penchant for opacity. Whether these problems are addressed, and how, will shape the group and its reputation for decades to come. 

Tata’s reasons for sacking Mr Mistry are unclear. He is from a family that has had a nearly 20% shareholding in the group for decades (most of the other shares are controlled by charities that are chaired by Mr Tata). Allies say that after four years in the job, Mr Mistry had got to grips with the inner workings of the company. He was ready to start changing it.

His critics, on the other hand, never believed that any executive…Continue reading

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Amp my ride

“THE car is the ultimate mobile device,” said Jeff Williams, an executive at Apple, last year. It was taken as another sign that the maker of iGadgets would be deepening its interest in the automotive sector (among other projects, it is developing an in-house smart car that is codenamed Project Titan). Now Samsung Electronics, its big rival in the smartphone world, is following. On November 14th the South Korean company said it would pay $8bn for Harman, a firm based in Stamford, Connecticut, that makes internet-connected audio, information and security systems for cars. The deal is Samsung’s largest ever, and the first big transaction for its vice-chairman and heir apparent, Lee Jae-yong, grandson of the firm’s founder.

Though it is best known for its sound systems, Harman is one of the world’s largest supplier of smart parts for “connected cars” that help owners to drive by linking to the internet and to chip-enabled devices. It made $7bn in revenue in the year to September, two-thirds or so of it from the car sector, and has over three times that in new orders. Its products are the first step towards autonomous vehicles. Over 30m…Continue reading

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Vein hope

DONALD TRUMP’S grandfather, Fred, got his start in the hotel industry at the turn of the 20th century supplying rooms, food, booze and female company to prospectors flocking to north-western Canada in the so-called Klondike gold rush. It may be part of this legacy that gave America’s president-elect his taste for golden fixtures and fittings. But it may also make miners a bit wary of Mr Trump. After all, their pockets have been “mined” by a Trump once before.

So the world’s biggest mining companies are downbeat about the rally in commodities prices that accompanied Mr Trump’s election victory, which briefly pushed up prices of copper at their fastest rate in five years and sent iron-ore prices to two-year highs close to $80 a tonne. On November 15th Rio Tinto, one of the world’s biggest mining companies, told 440 workers at an iron-ore mine in Western Australia to take two weeks off at Christmas, not as a celebration, but as a precautionary measure to reduce supply. It expects conditions to get much tougher in 2017. Its main rival, BHP Billiton, is also nonplussed. It predicts economic uncertainty, political instability and a…Continue reading

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Polluting the outlook

So they hope

IT WAS on November 16th that the International Energy Agency (IEA), an organisation that represents oil- and gas-consuming countries, announced its prediction that over the next quarter of a century renewable energy, such as wind and solar, and natural gas will hugely eclipse the traditional role that coal and oil have played in satisfying the world’s growing demand for energy (see chart). That is the base case for what it says is a powerful shift in the global energy landscape towards cleaner fuels.

The trouble is that after the projections were calculated, Donald Trump, who is both a climate sceptic and a fossil-fuel fan, was elected as America’s next president. As Fatih Birol, the IEA’s executive director, pointed out this week, no one knows what his energy policies will be. Yet he will run the world’s biggest producer and consumer of oil and natural gas.

Many…Continue reading

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Pot of gold

Flat white joint to go

IN THE 1990s Snoop Dogg, a rapper, called cannabis “chronic”. The drug was illicit and cool. In 2016 Mr Dogg is a cannabis investor, and the drug is poised to earn another title: consumer staple. On November 8th four states, including California, voted to approve recreational cannabis use. Four other states eased rules for medical marijuana. About three-fifths of America’s population lives in states that now allow cannabis use in some form.

So pot entrepreneurs face the thrilling prospect of normality. This week industry leaders were meeting in Las Vegas to discuss how the sector might expand. They have in prospect a vast, partially established market. More than 32m Americans already use cannabis. As the business becomes more normalised, it is sure to attract new customers. “It’s not often that you see an industry and you know the inevitability of it,” says Brendan Kennedy of Privateer Holdings, a private-equity firm that specialises in cannabis. Last year legal sales reached $6bn, according to the Arcview Group, an investment and market-research firm. By 2020 Arcview expects legal sales to be…Continue reading

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BusinessBusiness and finance

An uncertain time for business

 

AN AGE of uncertainty is upon us. For the past three decades or so, businesspeople have been able to steer by a few lodestars. Trade negotiators lowered and simplified trade barriers. Central bankers tried to keep inflation to a minimum. Policymakers around the world negotiated multilateral treaties on the environment. Global bodies such as NATO provided security in Europe. Today the lodestars are exploding, one after the other.

Meanwhile, Donald Trump is making policy on the hoof. It turns out that the Affordable Care Act of 2010, or Obamacare, is not so bad after all. A big section of his planned wall on the border with Mexico will be a fence. In the past presidents have always arrived in the White House with a detailed set of policies. Mr Trump arrives with a tatty envelope scrawled with a few jottings on the back. Across the Atlantic, Brexit has opened a Pandora’s box: nobody knows whether Britain will leave the European single market or negotiate the equivalent of an associate membership. The Supreme Court has yet to determine how much say Parliament will have in shaping the negotiations.

One of the big promises from…Continue reading

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Seize the day

“THE biggest risk in Europe is the Italian referendum,” said Gianfelice Rocca, head of Assolombarda, Milan’s chamber of commerce, this summer. For corporate Italy, much is at stake in the vote on constitutional reform, which will be held on December 4th. Victory for Matteo Renzi, the business-friendly prime minister, could mean a big fillip for firms of all sizes, whereas a loss would be “a shock in the system”, said Mr Rocca.

The national employers’ federation, Confindustria, agrees with him. If those campaigning for a “yes” vote are to be believed, firmer government, easier conditions for investors and generally brighter economic prospects would follow. The two main issues to be decided are reform of the Senate’s powers—whether to let the lower chamber pass future laws, even when opposed by the Senate—and whether decision-making powers should be brought back from regional governments to the centre.

Francesco Starace, the chief executive of Enel, a giant European electricity company that is one of Italy’s more successful firms, sets out a strong case that the proposed changes would bring important benefits to…Continue reading

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African potholes

“I WAS lucky my customers were three big white guys,” says Themba, an Uber driver in Johannesburg recounting a close call with taxi-drivers who tried to block him from collecting passengers at the airport that serves South Africa’s economic hub. “They pushed them out the way and we managed to drive off.”

The ride-hailing app has made a splashy if slow start in Africa. Of the 529 cities in which Uber connects riders with drivers, just 14 are on the continent. Yet Africa is fertile ground for a firm offering cheap and safe transport. Most passengers have to spring for overpriced cabs or catch a white-knuckled ride on the back of a motorcycle taxi.

In Abuja, locals have long used a low-tech version of ride-sharing. Many folk simply stick out a hand at the roadside to hail any passing car before negotiating a fare. Yet locals warn that fake taxis cruise the streets with robbers hiding in the boot, ready to jump out at a traffic light. In Lagos some taxi-drivers are even thought to be in cahoots with kidnappers. Not surprisingly, Uber seems to be growing quickly in the few cities where it has launched. In many places rides cost less…Continue reading

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A long road to recovery

THERE are two ways of dealing with a worrying problem in a car engine. One is a complete overhaul; the other is to tinker under the bonnet and hope the trouble goes away. Volkswagen’s efforts to deal with an emissions-cheating scandal that emerged in September 2015 are of the tinkering type. The German carmaker is desperate to draw a line under its ill-fated decision to fit software to 11m diesel cars that detected emissions tests and artificially reduced the amount of nitrogen oxide pumped out. But the disconcerting rumbles continue.

The latest setback came on November 6th, when VW said that a German investigation of market manipulation was examining the role of Hans Dieter Pötsch, chairman of its supervisory board. The probe, which began in June, is looking at whether Martin Winterkorn, VW’s former chief executive, and Herbert Diess, who oversees the core VW brand, should have disclosed the emissions cheating before the company publicly admitted wrongdoing. This is deeply uncomfortable for both VW and Mr Pötsch, who used to be the chief financial officer and was nominated to become chairman on the day the crisis began. It is also a reminder…Continue reading

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The big sort

“THE vultures all start circling, they’re whispering, ‘You’re out of time’…but I still rise!” Those lyrics, from a song by Katy Perry, an American pop star, sounded often at Hillary Clinton’s campaign rallies but will shortly ring out over a less serious event: a late-night party in Shenzhen to kick off “Singles’ Day”, an online shopping extravaganza that takes place in China on November 11th every year.

The event was not dreamt up by Alibaba, but the e-commerce giant dominates it. Shoppers spent $14.3bn through its portals during last year’s event. That figure, a rise of 60% on a year earlier, was over double the sales racked up on America’s two main retail dates, Black Friday and Cyber Monday, put together. Chinese consumers are still confident, so sales on this Singles’ Day should again break records.  

It points to an intriguing question: how will all of those purchases get to consumers? Around 540m delivery orders were generated during the 24-hour spree last year. That is nearly ten times the average daily volume, but even a slow shopping day in China generates an enormous number. By the reckoning of…Continue reading

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