Vodafone second largest mobile operator ‘pauses’ Huawei deployment in its core network

(qlmbusinessnews.com via uk.reuters.com — Fri, 25th Jan 2019) London, UK —

LONDON (Reuters) – Vodafone, the world’s second largest mobile operator, said it was “pausing” the deployment of Huawei equipment in its core networks until Western governments resolve concerns about the Chinese company’s activities.

Huawei is facing increasing scrutiny over its ties with the Chinese government and a suspicion that its technology could be used by Beijing for spying. Huawei has denied the allegations.

Vodafone’s Chief Executive Nick Read said on Friday that the Huawei debate was playing out at a “too simplistic level”, adding that it was an important player in an equipment market dominated by three companies.

Read said its equipment was used in Vodafone’s core – the intelligent part of its networks – in part of Spain and some other smaller markets.

“Given that, we have decided to pause further Huawei in our core whilst we engage with the various agencies and governments and Huawei just to finalise the situation, of which I feel Huawei is really open and working hard,” he said after Vodafone reported third-quarter numbers.

Vodafone said its key revenue measure deteriorated in the third quarter, down 40 basis points quarter-on-quarter to 0.1 percent, reflecting continuing price competition in Spain and Italy and a slowdown in South Africa.

Analysts had expected growth of 0.3 percent.

Shares in the company fell to their lowest level since July 2010 after the update, and were trading down 1.1 percent at 142 pence at 0840 GMT.

Vodafone said competition in the Spanish and Italian markets had moderated through the quarter.

“Lower mobile contract churn across our markets and improved customer trends in Italy and Spain are encouraging, however these have not yet translated into our financial results,” Read said.

But he said the signs of improvement underpinned confidence in Vodafone’s full-year guidance.

Vodafone expects around 3 percent growth in underlying adjusted core earnings for the full year, with free cash flow before spectrum costs coming in at about 5.4 billion euros.

Reporting by Paul Sandle

Sony to move European headquarters from the UK to the Netherlands

(qlmbusinessnews.com via bbc.co.uk – – Wed, 23rd Jan 2019) London, Uk – –

Sony will move its European headquarters from the UK to the Netherlands to avoid disruptions caused by Brexit.

The company said the move would help it avoid customs issues tied to Britain's exit from the EU.

Despite the move, Sony won't shift personnel and operations from the existing UK operations.

It is the latest Japanese company to flag a move to the continent in response to Brexit.

And on Tuesday appliance maker Dyson announced it was moving its headquarters to Singapore, from Malmesbury in Wiltshire, although it said it had nothing to do with Brexit.

The UK is on course to leave the European Union in March, but the two sides have yet to strike a deal.

On a recent trip to the UK, Japan's Prime Minister Shinzo Abe expressed concern over a no-deal Brexit.

He said it could hurt Japanese companies, which employ up to 150,000 people in the UK.

Electronics firms switch off

In a statement Sony said the move would mean “we can continue our business as usual without disruption once the UK leaves the EU. All our existing European business functions, facilities, departments, sites and location of our people will remain unchanged from today.”

Sony spokesperson Takashi Iida said the move would make Sony a “company based in the EU” so the common customs procedures will apply to Sony's European operations after Britain leaves the bloc.

Sony's rival Panasonic has already moved its headquarters to Amsterdam, mostly because of tax issues potentially created by Brexit.

Both companies say the decision is unlikely to have a major impact on jobs in the UK.

When Panasonic announced its move, it said “fewer than approximately 10” people would be affected out of a staff of 30.

Bank withdrawal

Several Japanese firms, including Nomura Holdings, Daiwa Securities and Sumitomo Mitsui Financial Group, have said they plan to move their main EU bases out of London.

Japanese bank Norinchukin announced earlier this month that it would set up a wholly-owned subsidiary in the Netherlands in response to Brexit and other economic changes in Europe.

Hitting the brakes

A number of Japanese carmakers have also expressed concern over the impact of a hard Brexit.

Toyota has warned that a no-deal Brexit would affect investment and would temporarily halt output at its plant in Burnaston.

Honda has already planned a six day halt in April to plan for “all possible outcomes caused by logistics and border issues”.

A further 175,000 high street jobs predicted to go as shift to online giants continues in 2019

(qlmbusinessnews.com via theguardian.com – – Mon, 21st Jan 2019) London, Uk – –

Value of retail property will slump as shift to online giants continues, says report

A further 175,000 jobs will be shed from struggling UK high streets this year and the value of retail property will slump as the boom in online shopping and rise of giants such as Amazon continue to take their toll, research warns.

More than 23,000 shops are forecast to close in 2019, according to the findings published on Monday in an annual report from the real estate adviser Altus Group.

The figures suggest this year will be even worse than 2018, when a series of high-profile company failures and store-closure programmes claimed nearly 20,000 stores and 150,000 jobs. They include both multiples or chains as well as independent stores and – in the hospitality sector – restaurants and casual dining outlets.

The seismic shift in shopping habits in the UK prompts the authors to predict that the overall value of retail property will tumble by 15.9% this year as shoppers are lured away from the high street by online alternatives.

Many high streets are struggling with fewer customers and the shift to online shopping. The most recent official figures available showed the number of shops, pubs and restaurants lying empty soared in the first six months of 2018.

Last year was a difficult year for the retail sector, with a long list of high street failures, including House of Fraser, Evans Cycles, Maplin and Poundworld, while other chains including Mothercare and Carpetright, together closed hundreds of underperforming stores. Retailers planning to close stores this year include Marks & Spencer and Debenhams.

Altus Group’s annual commercial real estate (CRE) innovation report found that 62% of major UK property owners and investors claim that Amazon and other online players have disrupted the retail property market.

A further 78% said the trend towards “experiential” retailing was affecting their investment decisions as customers seek out experience-led shopping. Overall, it warned that “2019 is set to be another tough year for Britain’s high streets as businesses continue to grapple with rising costs, subdued consumer confidence and an increase spend online”.

Separately, the Royal Institution for Chartered Surveyors has taken the unusual step of instructing valuers to be “aware of the potential for significant changes in value” in retail properties – effectively a wake-up call for listed landlords and owners of major shopping centres such as Intu Properties and Hammerson.

“Retail of the future will use bricks-and-mortar spaces in a very different way mixed in with leisure and lifestyle residential spaces” the Altus Group managing director, Guillaume Fiastre, said. “The most successful retailers – the survivors – are learning to draw in their customers with the promise of a personalised experience. Technology makes that all possible but it still needs a strong human element.”

The warning about plummeting retail values comes after the Postings shopping centre in Kirkcaldy, Fife, was put up for sale last week for £1.

By Rebecca Smithers

Google Drones Already Making Coffee Delivery In Australia

Source: WSJ

Alphabet's Project Wing is delivering hot coffee and food, hardware supplies and drugstore items via drone near Australia’s capital. Some residents say it’s the future, while others want the drones to shut up.

How Black Sheep Coffee Created Their Unique Blend To “leave the herd behind”

(qlmbusinessnews.com via telegraph.co.uk – – Sat, 19th Jan 2019) London, Uk – –

Gabriel Shohet and Eirik Holth can empathise with the blue back-to-workers who returned to their desks last week; five years ago, they too were uninspired by their careers.

But the duo did something about it, quitting their jobs to start a coffee chain.

The co-founders used to be university flatmates before graduating and joining private equity firms. They lost touch, but caught up on the phone one day about wanting to strike out on their own. “We were used to managing companies from the board, so never got stuck in or started anything from scratch,” explains Shohet. “Getting our hands dirty was very appealing.”

Inspiration struck: why not go into business together? “Coffee was our passion; we were always micro-roasting and experimenting with new blends at the flat,” recalls the entrepreneur. “We agreed to pack in our jobs, set a date and did it.”

From the beginning, they wanted their brand to stand out from the crowd. It inspired the name, Black Sheep Coffee (and its tagline, “leave the herd behind”).

They launched with a different brew: a 100pc speciality-grade robusta coffee that, unlike its commonly used arabica counterpart, has more caffeine and protein, and is higher on the PH scale. It makes for a smoother, frothier drink that’s easier to digest on an empty stomach.

Another difference is its work with homeless people, says Shohet. “We care deeply about doing good, but we wanted to do it directlyand not just donate to a big charity like everyone else.”

The Black Sheep owners introduced an initiative that enables customers to donate a discounted brew or completed loyalty card by sticking it or a note to a board in store. Those who can't afford a coffee can simply come in and grab one. “So many warned us against it, predicting drunks and thieves who would turn new business away,” recalls the co-founder. “They were wrong, of course – people have been polite and often help us to open in the morning.

“It's a neat way to fight social exclusion and break down barriers.”

The duo spent most of a start-up loan on kit, inventory and flights to meet suppliers. They carried out product tests and customer research by popping up at London markets and stations. “We had no salary and very little money,” recalls Shohet. “The first two years were really difficult, but we slowly built up [a positive] cash flow and enough landlord credibility that one eventually bought into our idea.”

A proper shop was a big turning point, but Shohet doesn't regret the financial struggle. “We had discipline and became very creative in terms of making things happen,” he says, giving the example of a stall in Urban Outfitters on Oxford Street. “We only sought out that partnership because we needed someone who would fit out our kiosk and wouldn't charge rent.”

The heavy footfall and prominent window branding was priceless, he thinks. “Not having any cash forces you to come up with cool concepts and different ways of getting things done.”

A £23,000 Kickstarter campaign helped the founders to kit out their first café in Charlotte Street, but they've otherwise shunned investment. “We've tried to grow without calling on institutions that may be looking for a quick return,” he says. “Short-term targets force you to compromise and limit your scope – it can kill the soul of a business.”

Black Sheep has been anything but limited, having grown to £10m in annual turnover and 28 shops across London, Manchester and Manila. “We're scaling very fast, which means we have to hire a lot of new people,” says Shohet, who leads 216 employees.

The biggest challenge has been finding and retaining that talent, he adds. Paying above market rate helps with the former (“if you want the best people, you have to be comfortable with the fact that they will be expensive”), while “clear” and “visible” career progression helps with the latter. “We have a strong training programme through which people can work their way up to head of coffee and gain industry-recognised qualifications.”

A smart benefit also enables staff to pursue their passions; the company will pay any employee to teach a free class to colleagues. “We don't want them to have to choose between Black Sheep and yoga or acting, for example,” says Shohet. “It's all about making sure that people have a good time working for us.”

Having a worse time is the high street, with more casualties expected this year. But the entrepreneur isn't worried. “Coffee is still very much about the experience,” he says. “People want to see it being made and drink it straight away; they want to use the Wi-Fi and hang out or host a meeting.”

In terms of what next for the brand, he wants to continue to focus on its two main mission statements: source the best coffee in the world and hire the best baristas in town. “Get those right and we can't really go wrong,” says Shohet, whose beans are currently sourced from India, Peru, Ethiopia and Papua New Guinea.

It will also keep on in its fight against plastic. Front of house, the business stocks paper straws and 100pc compostable cups and lids, explains the co-founder, who isn't a fan of offering discounts to clients who provide their own reusable cups. “We want to tackle the issue head-on, instead of making people pick between convenience and the environment.

“It's not the their responsibility to bring a cup or recycle another; it's ours.”

While there's still work to be done on the supplier side, Black Sheep has otherwise been plastic-free for three and a half years. “It's not that difficult,” says Shohet. “If we can do it, so can the big chains.”

By  Matthew Caines 

10 Amazing Mansions Nobody Wants To Buy

Source: The Richest

Despite popular belief, a mansion is not always more valuable if it was owned by a famous person. In fact, this ownership can actually decrease the property’s value. Studies show that the house of a famous person lasts an average of 36 days longer on the market than that of a non-famous person. The reasons for this are paradoxical. It seems that the exact reasons why someone would want to buy a famous mansion are exactly what turn people off from owning said mansion: there’s too much baggage.

Primark increased sales defy UK high street woes

(qlmbusinessnews.com via theguardian.com – – Fri, 18th Jan 2019) London, Uk – –

Primark is biggest UK clothing retailer by volume and likely to topple Next as No 2 by value

Primark said it gained market share, increased sales and cut down on discounting over Christmas by focusing on the high street and continuing to keep away from the internet.

Sales at the cut-price fashion chain’s established UK stores rose 3% over the Christmas period, according to analysts’ estimates, and slipped less than 2% in the four months to 5 January, despite a dismal period for many clothing chains.

The company, which does not sell online, is already the UK’s biggest clothing retailer in terms of volume. In value terms, it is number three, but is creeping closer to second-placed Next. Marks & Spencer still holds on to the top spot, despite its recent poor performance.

Primark’s good showing over Christmas defies a general shift in shopping away from the high street to online that is affecting rivals from John Lewis to New Look, prompting a slew of store closures across the UK.

John Bason, the finance director of Primark’s owner, Associated British Foods, said the chain’s combination of low prices, tight stock control and fashion hits such as faux sheepskin jackets and animal print dresses enabled it to cut back on discounting despite a step up in promotions by rivals.

Shares in the company rose nearly 6% on Thursday after the company revealed that Christmas at Primark in the UK exceeded expectations despite a warning ofchallenging conditions in an early December update.

ABF, which has a large food business, also flagged signs of improvement in sugar prices but warned of ongoing losses at its bakery business, which owns the Kingsmill, Allinson and Sunblest brands.

The update pointed to strong sales at its US Primark stores and a pick-up in Spain. The company is looking for new US stores to add to the nine it has already opened and two more already planned.

Sales at established stores worldwide fell by 2% over the four-month period but profit margins increased, partly because of the strengthening of the pound against the dollar, which is used to pay suppliers in the far east.

Bason said: “Not having the cost of servicing home delivery does allow us to have these lower price points. I know people love the convenience of that but the cost around it is massive.”

He said Primark communicated with potential shoppers online via social media, garnering 13m followers on various platforms including 5m on Instagram.

“Primark stores are fun and not down in the mouth with no money spent on them. People are out there to have fun rather than being on your own in your house looking at a computer,” he said.

By Sarah Butler

TSMC forecast sharp revenue drop as global slowdown eats away at smartphone and technology firms

(qlmbusinessnews.com via telegraph.co.uk – – Thu, 17th Jan, 2019) London, Uk – –

Semiconductor market bellwether Taiwan Semiconductor Manufacturing Company (TSMC)has forecast a sharp drop in sales growth as a global slowdown eats away at smartphone companies and technology firms.

Taiwan-based TSMC, which makes chips that are used in Apple's iPhones and iPads, said it expected revenues to fall to around $7.3bn (£5.7bn) in the current quarter, below the $8.1bn predicted by analysts, and a significant drop on its previous quarter.

Earlier this month, Apple warned that its revenues, which are largely driven by sales of the iPhone, were due to miss expectations.

With the global smartphone market slowing down as sales reach saturation point, chipmakers are expecting orders to slip.

TSMC endured its worst quarter in a decade in the three months ending in December as its market cap fell by $39bn.

The amount of revenue it is expecting would be significantly down on the $9.4bn the chipmaker made in the final three months of 2018.

TSMC is the world's largest dedicated semiconductor foundry, supplying customers including Qualcomm, Nvidia and AMD. It also manufactures dedicated chip designs exclusively for Apple's iPhones, such as the A12 Bionic chip which appears in the iPhone XS and iPhone XR smartphones. 

TSMC chief financial officer Lora Ho said the fall was down to weakening macroeconomic environment, “mobile product seasonality” and an overstocked supply chain.

Earlier this month, Apple chief executive Tim Cook warned shareholders that its sales were set to fall to around $84bn, down from a previous estimate of $93bn.

Meanwhile, South Korea's Samsung, which manufacturers the Samsung Galaxy S9 smartphone, also predicted its first quarterly earnings drop in two years last week as chip and phones sales stall.

By  Matthew Field 

Ford and Volkswagen to announce partnership at Detroit auto show

(qlmbusinessnews.com via theguardian.com – – Tue, 15th Jan 2019) London, Uk – –

Car companies seek to reduce costs amid slowing sales, with announcement expected at Detroit auto show on Tuesday

Ford and Volkswagen are expected to announce an alliance on Tuesday as the two car companies look to cut the cost of the technological revolution now shaking the industry and deal with slowing sales.

The announcement is expected at the Detroit auto show and comes after Ford and VW signed a memorandum of understanding last June to explore several joint projects, including the development of a range of commercial vehicles.

“We are talking to Volkswagen,” the Ford chairman, Bill Ford, said on Monday at the show. “The talks are going really well. We’re going to have more to say later this week. Stay tuned.”

Ford’s chief executive, Jim Hackett, has suggested that VW could also build Ford-branded cars in Europe.

An alliance would be the largest of its kind in the industry and comes as both companies have struggled. This month, Ford announced it was cutting thousands of jobs in Europe and closing plants. Its European sales fell 2.3% in the first 11 months of last year.

In an interview with Bloomberg, Hackett said Britain’s decision to leave the European Union had hurt the company’s “evolution” in Europe.

“As it relates to Europe, this is not just a new problem,” Hackett said. “We think there’s a design in the future that allows us to be there with Ford-branded products. But we have to get the industrial system in the right construct for that. I’m not going to pull any punches – Brexit hurt.”

But Hackett said Ford would not leave Europe as General Motors did in 2017, when it sold Opel and Vauxhall to PSA Group, owners of Peugeot and Citroën.

Volkswagen, meanwhile, has its own issues and sales have been hit by “dieselgate”– the revelation that VW executives had gamed emission tests by installing illegal software in 11m diesel cars.

Both companies have been hit by falling sales of diesel vehicles and by a slowdown in the Chinese market, the world’s largest, where car sales recently fell for the first time in 20 years. Analysts are also expecting the US market to contract over the next two years after several years of growth.

Michelle Krebs, an executive analyst for Autotrader, said an alliance would come at a crucial moment for both companies. Both are investing billions in new technology including autonomous vehicles and electric cars.

“The cost of developing these technologies is high and nobody knows when there will be a payoff,” she said. “It’s all expense and no clear path to profit.”

Ford has earmarked $15bn for electrified and driverless vehicle technology in the coming years and is renovating Detroit’s landmark Michigan Central Station into a “mobility lab” for new car technology.


By Dominic Rushe 

Debenhams rescue attempt could cost more than 10,000 jobs

(qlmbusinessnews.com via telegraph.co.uk – – Mon, 14th Jan 2019) London, Uk – –


A daring rescue attempt being drawn up to save Debenhams from going bust could cost more than 10,000 job losses, dealing the biggest blow to the high street since the collapse of BHS.

The Daily Telegraph understands that the chain has earmarked as many as 90 of its high street stores for closure, more than half the current total, as part of a radical turnaround plan.

Debenhams has 165 shops in the UK and Ireland, and 26,000 employees. It has said publicly that around 50 stores could be jettisoned but the board has quietly identified another 30 to 40 that could be offloaded as it seeks to focus on the most profitable ones.

Nearly 90pc of the chain’s pre-tax earnings are generated from a core of 80 to 90 shops, it is understood. Debenhams declined to comment. BHS imploded in 2016 with the loss of 11,000 jobs.

Debenhams plans to push ahead with a three-stage restructuring program despite a dramatic boardroom coup at the hands of Sports Direct billionaire Mike Ashley, who has amassed a 30pc stake in the retailer.

Ashley and fellow rebel shareholder Landmark Capital ousted chairman Ian Cheshire and chief executive Sergio Bucher last week. Cheshire has been replaced by veteran retailer Terry Duddy, while Bucher will continue to run the company without a board seat.

The City fears that Ashley’s extraordinary move could deal a hammer blow to Debenhams’ survival prospects. In The Sunday Telegraph, an insider accused the entrepreneur of “management by hand grenade”. Crispin Odey, who has a 5pc short against Debenhams, said it was “coming to an end”.

The company’s share price hit a record low of 3.8p, while its bonds have crashed to just 49p in the pound.

Bucher is expected to table a formal, three-stage turnaround proposal with lenders in the coming weeks. The complex plans will begin with a loan refinancing and partial debt-for-equity swap; followed by the attempted closure of up to half its stores; and a fundraising from existing shareholders.

However, there are significant hurdles to overcome. Around half of Debenhams’ bank loans have been hoovered up by American hedge funds, while any store closures will need to be approved by landlords.

Ashley, meanwhile, could attempt to block the refinancing, which would almost certainly be fatal. Retail footfall fell 2.6pc in December.

The fate of HMV will be decided this week when a deadline for rescue bids expires, Sky News reported.

By  Ben Marlow 

Inside Rolls Royce An iconic Symbol of Excellence

Source: Documentary House 2.0

It is an icon, a symbol of excellence, a symbol of empire. It brings to mind the faded glory of the aristocracy and yet, today’s aspirants to wealth and position still seek to own a “Rolls.” To many, there is nothing like a Rolls. They say Rolls-Royce is more than just a car. To them it simply means, the best. If someone says that something is “the Rolls Royce of anything,” we know immediately that it is expensive but probably the ultimate. As we trace the storied development of the company founded by Henry Royce and Charles Stewart Rolls, we'll see how Rolls-Royce Motorcars grew to represent the best in the world.

Heathrow Airport wants to expand flights operations up to 5 per cent whether or not a third runway is built

(qlmbusinessnews.com via independent.co.uk – – Tue, 8th Jan 2019) London, Uk – –

Britain’s biggest airport could soon have an extra 68 flights a day squeezed in on the world’s busiest pair of runways.

Heathrow Airport hopes to expand operations by up to 5 per cent whether or not a third runway is built.

As the West London airport launched a consultation into the biggest changes to airspace patterns in 50 years, it also revealed plans for “a short-term change to the way aircraft arrive at Heathrow” that could increase resilience – and squeeze in almost 25,000 flights a year.

To do so would require the 480,000 annual cap on aircraft movements, imposed in 2002 as a condition for building Heathrow Terminal 5, to be lifted.

At present all but 5,000 of the permitted slots at Heathrow are used; the “spare” slots are at times such as late evenings, Saturday afternoons and Sunday mornings when demand is light.

The key proposal is for a move to “independent parallel approaches” (IPA) when both runways are being used for landings.

While the standard operation at Heathrow involves one runway being used for arrivals and the other for departures, at busy times for arrivals – particularly early mornings – both can be used for touchdowns. But strict rules on sequencing mean that simultaneous landings cannot happen.

A Heathrow Airport spokesperson said: “Because Heathrow operates at 98 per cent of its capacity,  disruption or delays during the day can have a knock-on effect to the punctuality of flights.

“To mitigate this, we are always looking to improve how we manage aircraft arriving at Heathrow during particularly busy periods, and one of the ways to do this is through the introduction of new technology such as Independent Parallel Approaches [IPA].

“IPA will not only be beneficial for our passengers by improving punctuality, and preventing flight cancellations and delays –  it will also help to reduce the number of late running flights into the night which are disruptive to local communities.”

But while initially the focus would be on increasing resilience, the move would also provide the opportunity to increase arrivals by 10 per cent – representing almost 25,000 additional movements.

The airport stressed: “We would like to introduce IPA even if we do not get approval to build a third runway.”

In the consultation document, Heathrow revealed that some of the flight paths used for IPA “could overfly areas that are not affected by Heathrow arrivals today”.

Forty-two months ago, the Davies Commission unanimously recommended a third runway at Heathrow. While no significant works have begun, the airport says the new runway is on track to open in 2026, with the project costing £14bn.

Radical changes to airspace will be necessary ahead of a new runway opening, and Heathrow is asking local residents for their preferences for a range of arrival and departure patterns.

John Stewart, chair of HACAN, representing residents under the Heathrow flight paths, said: “A lot of West London will be badly hit by these proposals but there will be many other communities who will be relieved at the prospect of all-day flying coming to an end.

“It amounts to a near-revolution to Heathrow’s flight paths.”

The Airspace & Future Operations consultation runs until 4 March.

By Simon Calder

Prosecco House the first bar in London dedicated to only serving the Italian bubbly

Source: BI

Prosecco House is the first bar in London that serves the Italian bubbly only.

They have 28 different types of Prosecco, which they get from five vineyards in Italy and three distributors in London.

“From every single brand, there are different types because we do Brut, Extra Brut, Dry, Extra Dry but as well crisp, delicate, fruity… You name it,” owner Kristina Issa told Business Insider.

“We can accommodate every different taste.” Drinks are sold by the glass or by the bottle.

Prices for a glass range from £7.50 to £13.50, while bottles start at £37. The Rivalta Nero is the only exception.

This Prosecco is sold by the bottle only, for £68. Prosecco House is located a few seconds walk away from Tower Bridge, in the luxury complex One Tower Bridge.

How extreme frugality allowed these people to retire in their 30s

Source: PBS

Eschewing consumer culture, Pete Adeney, also known as Mr. Money Mustache, practices an extreme frugality that allowed him to retire at age 30. Avoiding car use, DIYing and investing in stock market index funds are among the tactics he and his fellow F.I.R.E. (Financial Independence Retire Early) devotees espouse. Paul Solman reports from Colorado in this installment of “Making Sense.”

Sneakernomics: How Allbirds took a crazy leap of faith against the big players making sneakers

Source: CNN Business

(qlmbusinessnews.com via bbc.co.uk – – Sat, 5th Jan 2019) London, Uk – –

Four years ago Joey Zwillinger was an executive at a “hot” biotech company and making good money.

So when he decided to leave to join a start-up making trainers out of wool, friends and family were bemused.

“They naturally said I was quite dumb,” he says. And that was among the more polite reactions.

Why would anyone want to go into an industry where giants like Nike and Adidas deploy vast marketing budgets and roll out thousands of designs a year?

But for Mr Zwillinger and his co-founder Tim Brown, the creation of Allbirds was not quite the crazy leap of faith that it seemed back in 2014.

The economics of making and selling trainers (or sneakers to many outside the UK) had been changing.

How much?

Making trainers is not as profitable as you might think.

Rahul Cee trained as a footwear designer and had a long career in the industry, working for Nike and Vans in India. He now runs his own website, Sole Review, which – as the name suggests – reviews running shoes.

Using publicly available data he estimated how the costs break down for a typical pair of trainers.

According to his calculations, the final sale price is made up of:

  • manufacturing costs: 22%
  • staff, warehousing, office rents and patents: 11%
  • marketing and advertising: 5%
  • freight and insurance: 5%
  • taxes: 2%
  • shoemaker's profit: 5%
  • retailer's share: 50%

Newcomers like Allbirds can skip the last part of the process.

“We decided early on that we were only going to do direct-to-consumer, not sell our shoes through the wholesale channel – through retailers,” says Mr Zwillinger. “We didn't quite realise how smart a move that was at the time.”

So Allbirds sold shoes online and has only recently opened its own stores.

“Other shoemakers are giving away so much margin to the stores that sell their shoes and they are not able to invest in quality material for their product.

“They're also on discount all the time. So then that forces them to go quick with speed and style changes.”

he big shoemakers are not blind to the cost of retailing their wares.

In 2017 Nike announced it was radically cutting back on the number of retailers it uses and set a target to generate 30% of its sales online by 2022.

Changing tastes

It is not just the way shoes are sold that has changed. Customers are demanding different sorts of shoes.

“Shoes that are meant for performance, like running or basketball, are really out of fashion and people are buying shoes that are athletically inspired but not intended for a particular sport,” says Matt Powell, senior industry adviser for sports at the NPD group, a retail consultancy firm.

Mr Powell dates the emergence of so-called athleisure shoes to mid-2015.

“Now that we are in this athleisure phase, where we're not really requiring that the shoes have technology in them for cushioning or whatever, it's easier for smaller brands to break into the market.”

Allbirds, which has just opened a store in London's Covent Garden, has been one of the companies that has benefitted from that trend.

“The fact that no-one's tethered to a desk means that their wardrobes are not tethered to an office environment and that's driven a change in wardrobe that makes everyone less formal,” Joey Zwillinger says.

“Shoes need to aesthetically work for a number of different activities – when you're at work and also at dinner. They also need to be comfortable for a longer period of time.”

Marketing

And that shift away from shoes used for sport to everyday activities has helped save money on marketing.

In 2015 Nike signed a lifetime endorsement deal with basketball superstar Lebron James, reported to be worth $1bn (£800m). But those big deals are becoming less important.

“Earlier, things like athletic endorsement were the focus – like signature shoe models based on basketball players,” says Rahul Cee.

“While that still exists today, this approach matters less to the consumers. Now marketing is more fragmented, targeting smaller segments of consumers more effectively. Brands now focus on data and also the consumer experience.”

Knitted shoes

If you are wearing trainers now, take a look at them. Are they made of several pieces of fabric stitched together? That's the traditional way of making the upper part of a shoe and it's labour-intensive.

Shoemakers have been introducing upper parts that can be knitted as one piece and then joined to the sole. Half of Allbirds' shoes are made this way.

The big shoemakers have also been moving in that direction. Nike introduced its Flyknit Racer in 2012 and has been automating more of its production.

And this year Adidas opened its second highly automated plant, in the US state of Georgia.

Despite the innovation, shoemakers should keep it simple, says Mr Cee.

His best-selling shoe while working in the Indian trainer business? A Nike-branded sandal.

By Ben Morris

Next lowers profit forecasts but Christmas sales rise

(qlmbusinessnews.com via news.sky.com– Thur, 3rd Jan 2019) London, Uk – –

Shares in Next, which fell 10% last year, rose more than 6% as Christmas trading offers cheer the high street.

Fashion chain Next lowered its profit forecasts but said sales over the crucial Christmas trading period rose.

The retailer downgraded its full-year profit forecast to £723m, from the £727m previously expected.

It blamed the lowered guidance on the sale of seasonal products, such as personalised gifts and beauty products, which bring in lower profits than clothing.

Next also said it faced higher costs associated with selling products online.

But it said full-price sales for the festive period were in line with expectations, up 1.5% between 28 October and 29 December.

Sales at its 500 stores slumped 9.2% over the Christmas trading period, but this was offset by a 15.2% surge online.

Next's trading update will come as a relief to the high street, which has been decimated with consumers tightening their wallets and switching their spending online.

There had been fears Next could join other retailers in starting to discount products before Christmas to bring people through the doors.

Online fashion group ASOS fuelled a Christmas crisis when it issued a profit warning in the run-up to the holidays – raising fears the high street malaise had spread online.

Paul Hickman, analyst at Edison Investment Research, said: “What these results from Next show is that a closely managed business with an appropriate strategy to migrate online, can limit risk to relatively small proportions.

“Arguably, that strategy is moving even faster than expected, and the company appears to be building share in the online market, where the pre-Christmas warning from ASOS had fuelled concerns.”

The latest updates come as HMV appointed administrators and follows on from the demise of Poundworld, Maplin and Toys R Us last year.

A last-minute rush to buy gifts on Christmas Eve helped sales at John Lewis to rise 4.5% in the week to 29 December, the department store said on Wednesday. It plans to report a “more meaningful picture” of trading on 10 January.

Shares in Next, which fell 10% last year, rose more than 6% at the start of trade.

Marks & Spencer and Associated British Foods, which owns Primark, saw their stocks rise more than 2% on Next's trading update.