This Week in Retail: This is only the Beginning

August 14, 2020

Big Tech Testifies Before Congress

Big Tech vs. Government

On Wednesday, four of tech’s largest CEOs were grilled by the congressional antitrust subcommittee via video conference over concerns of possible antitrust violations.

But why were they interviewed and what is an “anti-trust” violation?

The US government has “anti-trust” laws in place to promote fair competition in an open-market economy. Things like price-fixing conspiracies, corporate mergers that are likely to reduce the competitive nature of certain markets, and predatory acts designed to gain or hold on to monopoly power are examples of violations of these laws.

In other words; the government is concerned that these tech companies have gotten too big and that they are undermining competition in their respective industries in order to gain more power.

The Acceleration of Tech

Now, these interviews came at a really interesting time, big tech is more powerful now than ever as the world has shifted to a more digital economy amidst the coronavirus lockdown. These four CEOs have seen a huge amount of wealth appreciation as a result.

That being said, I don’t think that this investigation is just about potential monopolistic business practices. The decentralized nature of technology undermines the very power and influence of the government, and that scares them.

Social media has changed politics forever, eCommerce has shifted consumer culture, and cryptocurrencies have paved the way for a decentralized financial system. Technology is slowly depleting the government’s power and they need to break it up before it’s too late.

At the end of the five-hour interrogation session, Republican representative Cicilline concluded that all four companies that testified are in fact monopolies. “These companies, as they exist today, all have monopoly power,” he said during closing statements. “Some need to be broken up.”

“These companies, as they exist today, all have monopoly power..Some need to be broken up.”

I don’t think this won’t be the last time we see a showdown between the government and big technology firms. However, as society becomes more and more reliant on technology in our day-to-day lives, the question becomes; are these firms too important to be dismantled?

1. Retail + Tech

Shopify Beats Earnings:

Background: Shopify is one of the most talked-about retail companies in 2020. What started as backend eCommerce and point of sales software has grown into a full-service distribution and fulfillment network. The sixteen-year-old Canadian company has been able to capitalize on the pandemic and the shift to eCommerce with their shares rallying over 100% in the last six months.
Details: On Tuesday, Shopify released their Q2 earnings and beat Walstreet’s expectations for a second-quarter in a row. The company reported that Q2 revenue rose 97% YoY, largely driven by the mass adoption of e-commerce resulting from the pandemic.

Fitness Startup Tempo Raises Money:

Background: The at-home fitness equipment industry has taken off since the beginning of the pandemic. Companies like Peloton have gained market share and most recently the fitness startup Mirror was acquired by Lululemon. There is a clear appetite for this new market as consumers spend more and more time at home.
Details: On Wednesday, the smart fitness startup Tempo raised $60M in a Series B round. The free-standing “Tempo Studio” combines equipment, training guidance, and social motivation with 3D sensors and artificial intelligence to create a full at-home workout experience.

2. Changes to In-Store Shopping

Major Retailers will be Closed for Thanksgiving

Background: For decades, Black Friday shopping has been a tradition that marks the beginning of the holiday shopping season. Consumers eager for deals and discounts line up outside stores on Thanksgiving night ready to start their Christmas shopping. But this year will look very different.
Details: Walmart was the first major retailer to announce that its store will be closed on Thanksgiving this year with Target, Kohl’s, and Best Buy following soon after. This will be a devastating blow to retail’s Q4 revenue, where the industry typically generates a majority of its sales. Look out for more bankruptcies towards the end of this year and early next year.

Robots to Replace Humans in Retail?

Background: Retail associate is one of the most common jobs in the USA, employing close to 4.3M people. As the pandemic has completely disrupted in-store shopping, many large retailers are now investing in automating away these jobs.
Details: At the Annual World Retail Congress in Madrid JD.come CEO Richard Liu spoke on the future of the retail industry. JD.com, China’s second-largest eCommerce company, has invested heavily in drone delivery, robotics, and automation. He went on to say “sooner or later, our entire industry will be operated by AI and robots, not humans.”