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| Here's your daily business briefing. - 🌐 Pandemic continues to limit consumer choices
- 👗 Deep Dive: Shein dominates fast-fashion
- 🛡️ Airbus offers $2B for Atos cyber unit
Thanks for reading!! Shriram
p/Shriram | |
| 1 | | COVID-driven supply chain challenges led companies to streamline product offerings and cut consumer choices. In various industries, including groceries, health, beauty, and furniture, retailers and suppliers found that offering fewer products was cost-effective, with new items making up about 2% of in-store products in 2023, down from 5% in 2019, according to Circana. More: - Shelf Engine, which automates ordering for grocery retailers, stated that large grocery stores cut their fresh food selection by 15% to 20%, which helped them save money and curb food waste.
- Executives observed that, despite obstacles like growing costs and interest rates, decreasing product ranges helped boost profitability.
- Many industry experts have voiced worries regarding the decline in innovation and its effect on smaller firms that depend on broader product offerings.
- Reducing less-popular products has become a trend, creating room for new lines and more deliberate product introductions.
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What the numbers say: Shein, poised for an IPO, achieved about $23B in global revenue in 2022, comprising almost 20% of the global fast-fashion market. Surpassing Zara and H&M in sales, Shein became a significant player, introducing 1.5 million products—37 times more than Zara and 65 times more than H&M. Relevance: Shein poses a significant threat to traditional fast-fashion players Zara and H&M due to its agile supply chain and distinct business model. Inditex and H&M faced a "sell" rating from Deutsche Bank, citing challenges from Shein and its fast-growing competitor, Temu, owned by PDD. More data: Shein's strategy involves a flexible supply chain with China-based suppliers, enabling quick scaling based on demand. Its rapid production cycle, driven by AI for design ideas, differs from Zara and H&M, which rely on traditional forecasting and larger order volumes. | | | |
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| 3 | | Airbus is developing a bid of up to $1.97B for the big data and cybersecurity division of Atos (BDS). A component of Atos' plan to restructure and lower its debt load — which totals over $2.45B and matures by 2025 — includes the all-stock transaction. More: - Following the news, Atos shares dropped 6%, and the company's market value dropped to $799M, a 90% decrease over the previous three years.
- Airbus wants to increase the scope of its cybersecurity efforts, and this acquisition might accelerate the company's defense, security, and digital transformation initiatives.
- A French defense electronics company, Thales, has already expressed interest in BDS to grow its cybersecurity division.
- Atos is negotiating with Czech billionaire Daniel Křetínský for its Tech Foundations business, signaling prolonged and uncertain talks.
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| 4 | | IKEA is expanding its new quarter-sized city-center store format after overcoming initial challenges. Following five years of trial and error, IKEA has successfully opened city stores in San Francisco, Stockholm, and Copenhagen, combining the familiar features of traditional stores with new technology to replicate the suburban shopping experience. More: - IKEA targets distinct customer demographics at its downtown locations; shoppers in city centers tend to be more impulsive and may spend more money overall.
- The original Paris store had to undergo numerous remodels in response to client input, changing the product selection, layout, and overall shopping experience.
- Self-checkout kiosks and the use of technology to make up for space constraints are becoming necessities for downtown retailers due to their increased customer base.
- To enhance the showroom experience in smaller stores, IKEA tests an immersive room that digitally displays its selection.
- IKEA's adoption of smaller locations is consistent with a more significant U.S. retail trend.
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| 5 | | The U.S. national debt has crossed the $34T mark, achieving this milestone within three months of surpassing $33T, prompting concerns about the record debt level. Fiscal watchdogs are warning about potential impacts on both the economy and national security. More: - Despite a robust economy and low unemployment, the debt has grown, presenting an opportune time to address the federal deficit.
- Bipartisan disagreements over tax cuts and spending plans are significant factors in the growing national debt, which both Republicans and Democrats point the finger at.
- Government shutdown threats have become a recurring theme in political impasses over the nation's debt.
- In August, Moody warned about the possibility of removing the final flawless AAA rating, while Fitch cut the U.S. government debt rating from AAA to AA+.
- According to the Treasury Department, net interest expenses increased by 39% in the fiscal year 2023, which concluded on Sept. 30, over the prior year.
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| 6 | | ValueAct Capital Management pledges support for Disney's board nominees, collaborating on strategies for financial improvement, while Blackwells Capital, an activist hedge fund, nominates three directors to counter Nelson Peltz's Trian Fund Management. Iger faces pressure from Trian since his 2022 return amid challenges in Disney's streaming services and movie performances. More: - Peltz and former Disney CFO Jay Rasulo are suggested for board membership by Trian, who owns roughly $3B in Disney stock (1.8% of outstanding shares).
- Blackwells, owner of roughly $5M worth of Disney stock, suggests nominations to shareholders who support Iger but are against Trian's aggressive stance.
- ValueAct Capital Management is well-known for expediting shareholder-friendly initiatives at businesses, and it has an undisclosed investment in Disney.
- Disney's stock, which had gained 2% over the previous 12 months, barely reached $90.46 following the disclosures.
- Iger pledges to reduce expenses by $7.5B to solve financial difficulties and eliminate 8,000 jobs.
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 | Freelance Writer | | Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. | | This newsletter was edited by Aaron Crutchfield | |
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