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Digital sales boomed from March through May, but in June, sales dropped $7 billion from May.
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Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for positive trends or clever moves, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.
💻 Why the E-Commerce Boom May Already Be Over 💻
The Buy/Sell/Hold Analysis
In the months since the pandemic slammed the brakes on all of our normal shopping routines, e-commerce has roughly doubled from just over 15% of U.S. retail sales to about 33%, according to McKinsey. In a flashy new analysis, the white-shoe consultant firm trumpets this as e-commerce growth fast-forwarding one decade in just three months.
In its June 2020 Digital Economy Index, Adobe offers further granularity to this news. The software company says that the e-commerce sales surge — an uptick thus far totaling about $77 billion — amounts to half of what is usually spent online in the entire end-of-year holiday season, the biggest selling time of the year.
Exciting stuff. But consider the context: Since Covid-19, apart from grocery stores and Home Depot, much of the physical retail world has either been entirely closed in lockdown or shunned by pandemic-panicked consumers. Yet even with all that advantage — the rough equivalent of tying a basketball player’s legs together and one arm behind their back — e-commerce has managed to capture only a third of total retail sales. There is every reason right now to buy entirely online, yet Americans have largely stuck with tried-and-true brick and mortar.
What gives? While Covid-19 has fast-forwarded trends like surveillance technology, video conferencing, and automation, online shopping seems to already be slowing down. Digital sales boomed from March through May, but in June, sales dropped $7 billion from May. July figures will be out soon, but the trend line at the start of the month was already downward. This includes groceries and apparel, which fell 18% and 15% in June, respectively.
One reason for the dip may be that online goods are no longer as cheap as they once were: “Consumers are now purchasing an online basket of goods for $1.01 that was worth $1.00 in June 2019,” Adobe said. Although online prices were down through the first few months of the pandemic, last month they began to creep back up.
So yes, we’re certainly buying more online. But as of now, we don’t seem to like it all that much.
— Steve LeVine
⚡Lightning Round ⚡
⚡ Berkshire Partners Agrees to Buy CrossFit. At a time when gyms face an existential crisis and corporate America faces an overdue racism reckoning, it takes some chutzpah to acquire a fitness brand whose founder and CEO Greg Glassman stepped down in June following racially insensitive comments in the wake of George Floyd’s killing. But Berkshire — which as part of the deal is partnering with CrossFit gym owner, athlete, and now incoming CrossFit CEO Eric Roza — also has a history of prioritizing the long game. Perhaps in this case, the very, very long game. Hold.
⚡ Quibi Scores 10 Emmy Nominations. Despite its calamitous launch in the early days of the pandemic, Jeffrey Katzenberg’s supremely mockable bite-size streaming platform has swept the Emmy nominations for outstanding short-form acting and short-form comedy or drama series. Admittedly, these aren’t the most cutthroat or celebrated Emmy categories, but after four months of bad press, this is undoubtedly a much-needed micro-size win for a $1.75 billion-backed startup that flopped out of the gate. Buy.
⚡ TikTok Plays the Competition Card. The social media behemoth beloved by Gen Z — now valued at $50 billion and under threat of a U.S. ban — took aim on Wednesday at its big tech rivals as they were being grilled in a Congressional antitrust hearing. CEO Kevin Mayer announced the company was launching a “Transparency and Accountability Center” for the public to track its moderation and data practices, urging competitors to follow suit and arguing that TikTok served as a much-need advertiser alternative to Facebook. It’s a clever diversion from Chinese security concerns, but unlikely to sway an administration that’s distanced itself from hard-nosed free-market ideology. Sell.
⚡ Coca-Cola Enters the Hard Seltzer Market. The beverage giant announced plans this Tuesday to launch hard seltzer under its trendy Topo Chico brand later this year in select Latin American markets and in the U.S. in 2021. With ready-to-drink alcoholic beverages like hard seltzer seeing outstanding 43.1% sales growth in 2019 and an estimated 21.9% jump in 2020, Coca-Cola is wisely leveraging a cult favorite for its own slice of the millennial pie. Buy.
📈 The Number: 1,757%
That’s how much Kodak’s stock rallied following the announcement of its pivot to pharmaceuticals.
Eastman Kodak Company — everyone’s favorite case study in how iconic industrial giants can quickly lose their innovative edge — has had quite the week. On Tuesday, Kodak went from being a washed-up camera pioneer to a pharmaceutical manufacturer, with the help of a $765 million government loan from the Trump administration under the Defense Production Act. The announcement sent the company’s stock skyrocketing so quickly it tripped 20 circuit breakers in a single day; shares rallied from $2.62 on Monday’s close to a peak of $46.03 early Wednesday afternoon. But this isn’t the first time Kodak has tried to reinvent itself: They shuttered their camera business in 2012, and in 2018 made a messy attempt to launch their own cryptocurrency. Equally messy was all the suspicious trading activity that went on immediately prior to the announcement. So does Kodak have a bright new future in the pharma business? Color us skeptical.
— Kaushik Viswanath, Senior Books Editor, Marker
📖 Marker’s Longread: How Starbucks — once on top of the world fending off coffee and fast food rivals — got left behind in the pandemic.
🔎 Marker’s New Fixation 🔎
This week, Danielle Campoamor explored what’s driving the pandemic-induced nostalgia boom: “Things just seemed easier in the Before Times.” Which is probably why, along with my pink baseball caps and Ellio’s frozen pizzas, I’ve recently dusted off my original AOL Mail account (circa middle school, 2005). I’ve discovered several thousand unread emails chronicling the past decade, organized in a delightfully unappealing, outdated, iconic blue UX. AOL Mail isn’t optimized or sleek like Gmail, but that’s the point — it’s become my digital equivalent to slow food, allowing me to casually peruse and cherry-pick emails devoid of urgency and relevance. Like many early email accounts, mine was registered under a pseudonym, and it’s a true joy to send and receive messages detached from the personal obligation I associate with always-on assault of Slack notifications.
— Jean-Luc Bouchard, Senior Platform Editor, Marker
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