In this week's commercial awareness update, we discuss the breakthrough between China and the US, Facebooks new digital currency, retail news from Boots and H&M and the average spend of a UK night out.
China & US
Earlier this week, global markets rose as reports of a trade breakthrough between the US and China emerged. A meeting between Donald Trump and his Chinese counterpart, Xi Jinping, led to trade talks being resumed between the world’s two biggest economies. The truce has meant that Trump committed to delaying the $300 billion worth of extra tariffs he’d previously wanted to place on Chinese goods entering the US. China also agreed to drop its planned retaliatory measures. Instead, new talks will commence with the aim to reach a trade agreement. There’s been increasing pressure on both presidents due to economic growth across the world slowing. Trump has just kicked off his new campaign to be re-elected as US president, which could go some-way in explaining the timing of this truce. There have been reports that domestic jobs could be put at risk with increased tariffs, potentially harming his campaign.
Within the last week, Trump has also reversed his decision to blacklist Chinese tech company, Huawei. Just six weeks ago, the US Commerce Department banned American companies selling products to Huawei. Many have thought this a surprising move, given talk of the company being a threat to national security just weeks ago. The president says the situation will continue to be reviewed.
Facebook new currency
Last month, Facebook announced that it will be launching Libra - a new global currency powered by blockchain technology, which will allow people to send money across the world with lower fees. This will be introduced in 2020 as a digital wallet for Libra and will be available on Messenger, Whatsapp and additionally as a solo app, Calibra.
It is likely that there will be a very small fee to use this cryptocurrency, but Calibra is thought to allow you send Libra as easily and instantly as sending a text. Libra has been marketed as allowing 1.7 billion of the world’s mobile-phone owning population to make cheap, instant payments. It is a clever move for Facebook to make, as it will allow the social media giant to make more money from its apps’ two billion users if consumers purchase directly from partners who are advertising on their platform, all while Facebook takes a lucrative cut. This could help Facebook develop an entirely new revenue stream apart from advertising. However, it’s not without controversy and the big banks so far have steered clear of the project. These banks currently drive the global financial system and are working on their own technology to improvements. Working with Facebook could be an option, but something no big bank has hinted thus far.
Questions to ask yourself - After several high-profile setbacks and Facebook’s track record with security, will consumers be willing to trust the tech giant with their digital money?
Last week, the world’s second largest fashion retailer, H&M, reported a weaker-than-expected quarterly profit. The company made less profit between March and May than it did in the previous year, despite bringing in more revenue. However this did not spook investors as shares rose by 14%. There were several reasons for H&M’s poor results, including unseasonal weather, as the spring trends became difficult to sell and consequently were put on the sale rack. However, there has been good news for H&M as they have reported their sales this quarter are currently growing twice as fast as the last and they are expecting sales to be 12% higher than last year. The fashion store has also said they will limit its opening of stores, with 130 stores opening instead of the previous target of 175. In the last 5 years, the retailer’s share price has decreased by 43%; however a turn-around may soon be in the cards for the company as its restructuring begins to take effect.
Questions to ask yourself - with the high street on the decline, will H&M be able to turn the tide and prove investors right?
It’s continuing to be a bleak time for the British high street and pharmacy chain, Boots, has not escaped this. The high street store has confirmed that it will be closing 200 shops, with the managing director, Sebastian James, stating that “it’s the right thing to do” in the current trading conditions. Currently Boots has 2,485 stores across the UK, but has asserted that the closures will cause little impact on it’s current 56,000 staff with the “overwhelming majority” being relocated to nearby stores. Most of the 200 stores marked for closure are understood to be loss- making, or within walking distance of other stores. The news comes days after the chain unveiled a new-stye store in Covent Garden, with an Instagram zone where customers can take pictures of purchases and a YouTube studio offering video makeovers. The MD has stated that the retailers focus will now be on ensuring stores are “more differentiated and personalised, with the best brands at the best value”.
The cost of a student night out is usually considered pretty cheap, but across the UK that isn’t always the case. A new survey found that Britons spend £70.56 on average when they go on a night out. This represents a 20% rise compared to the year before, with significant increases in expenditure on pre-drinks and transport. With services like Uber expanding into new locations, it’s never been easier to book transport, potentially increasing the likelihood of more people using private hire cars, compared to cheaper methods of transport. The survey also found that people are for the first time likely this year to spend money going to the cinema, compared to drinking in pubs.
Research conducted earlier in the year found that 18-24 year olds are drinking less, but this doesn’t appear to have impacted people’s want for a night out. However, trends of low alcohol consumption could lead to problems in the future for the club and pub trade.