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Governor Andrew Bailey said the Bank of England had ample “firepower” to support the UK economy but there was a longer-term challenge to make sure it had enough “headroom” to launch a big bond-buying operation in the event of a future crisis
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A Brazilian court removed the governor of Rio de Janeiro amid claims the politician embezzled money earmarked for coronavirus relief
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The UK will use its own regulator to fast-track a Covid-19 vaccine if a candidate is found before the country formally leaves the EU’s regulatory sphere
Pandemic upends retail traditions
“The little bug that you can’t even see put us out of business,” says Henry, his voice straining with emotion. “We didn’t think it would end this way.”
The FT Magazine’s main feature this weekend is a lament for America’s “mom-and-pop” stores, the small family-owned businesses that have been under pressure for decades from big retailers and the rise of ecommerce — and now face a knockout blow from the pandemic.
The distress experienced by bricks and mortar stores is matched by the acceleration of the move to online shopping, not just in the US but across the world. The latest manifestation is the pending £4.5bn flotation of Hut Group, the UK ecommerce company, set to be the biggest London listing of the year.
Sweden’s Klarna, Europe’s largest fintech company and provider of payment services for companies such as Ikea, Nike and H&M, and with rapper Snoop Dogg among its investors, is also moving towards a flotation. “We are in this odd situation,” said its chief executive. “Coronavirus has rapidly accelerated our growth. It’s a little odd: the world is impacted in a very negative way but at the same time we are doing very well.”
Another sign of the times is the investment by Walmart — the world’s biggest traditional retailer — in TikTok, the Chinese video-sharing app, for its potential to boost Walmart’s ecommerce business and help it take on etail giant Amazon.
The pandemic has also highlighted changes in consumer behaviour that could become permanent. Clothing store Abercrombie & Fitch has benefited from increased demand in casual gear — suits are out, hoodies and joggers are in — while at the other end of the spectrum, Italian artisans fear Covid-19 will finish them off as orders from luxury goods retailers plummet.
As with US mom-and-pop stores, the pandemic has added to existing challenges to create an existential crisis. “We are losing the characteristics that have allowed us to survive until today,” said the head of the Italian fashion chamber. “It’s like going to war with knives when everyone else has bombs.”
Markets
Marshall Wace, one of Europe’s biggest hedge funds, has built the largest short position against Lloyds Banking Group on record, highlighting a feeling among some investors that UK bank stocks still have further to fall even after being hammered during the pandemic. Shorting involves borrowing shares and selling them in the market, hoping to buy them back later at a lower price.
The dollar fell on fears that the Federal Reserve’s new inflation goal (see below) could hit the appeal of US assets. It has fallen almost 4 per cent since the end of 2019 because of concerns over low real yields and the country’s handling of the pandemic. US government bonds also weakened — higher levels of inflation are seen as a negative for bonds, especially those of longer maturities.
A performance survey for the FT shows two Morgan Stanley mutual funds have fared better than any other US funds during the pandemic, thanks to big bets on hot tech stocks such as Shopify, the Canadian company that helps small and medium-sized businesses sell products online.
Business
Coca-Cola is restructuring and cutting thousands of jobs after the closure of bars and other venues hit demand for its beverages. The company revealed the steepest drop in its quarterly sales in more than a quarter of a century last month.
There’s no end in sight to the turbulence in the air travel sector. The UK’s Gatwick airport reported losses as passenger numbers plunged, Norwegian Air said it needed another rescue package and engine maker Rolls-Royce said it would sell £2bn in assets after record losses. Finnair is holding the first bond sale by a European airline since the pandemic began while a UK start-up offering cheap flights in tiny aircraft is doing great business.
Sandwich chain Pret A Manger slashed a third of its workforce as its core commuter customers worked from home. The FT Editorial Board said it was too early to bemoan the death of cities: “While many are heading for greener pastures, plenty of city residents are waiting, with bated breath, for when they can enjoy the concrete jungle again, perhaps even with a little more personal space.”
Global economy
There were some mildly encouraging data on US jobless claims yesterday, although there is no sign of an end to the stand-off over further government stimulus. The Federal Reserve’s announcement of a new monetary policy strategy that would be more tolerant of higher inflation was welcomed by the FT Editorial Board, which argued that the more pragmatic stance would provide firmer foundations for economic recovery.
Europe’s tentative economic recovery is not being felt in Spain, where business sentiment fell from the previous month. And in France, new data showed the biggest quarterly drop in disposable income for more than 70 years. Tourism in Europe — the world’s largest and most competitive destination — will suffer well beyond this summer, according to rating agency Moody’s. The EU has also lost its trade commissioner Phil Hogan over breaching lockdown rules.
Investors are alarmed over the Brazilian government’s refusal to loosen or lift a spending cap in place since 2016. The country’s finance minister has defended the ceiling but is at odds with a cabinet that sees political dividends from boosting spending.
Readers respond
Order of the Ditch comments on UK retailers report widespread job cuts as shoppers move online
I am the landlord of two small independent shops in successful high streets. Here are my observations about physical retailing:
1) Physical shops are at unfair disadvantage when it comes to online simply because of the amount of rates and other costs that go with a shop but don’t go with a warehouse.
2) The only successful shops will be specialist shops or small independents.
Retailers sell the same generic garbage from China. If they are all selling the same sort of items the average customer will seek out the best price which in turn triggers a viscous race to the bottom. Online excels at race to the bottom.
3) The average high streets are indistinguishable from each other.
4) Councils’ punitive parking charges make online a no-brainer. Why would I spend fuel money to travel somewhere where I have to spend money parking when the delivery would cost less?
5) There is a huge amount of overcapacity. As I write there are now a large number of boarded up shops on Princes Street and George Street in Edinburgh. Despite this, the finishing touches are being made to a massive new shopping centre a couple of hundred metres away.
Get in touch
How is your workplace dealing with the pandemic? And what do you think business and markets — and our daily lives — will look like after lockdown? Please tell us by emailing covid@ft.com. We may publish your contribution in an upcoming newsletter. Thanks
The essentials
Follow the progress of global recovery with a range of alternative indicators at our tracking hub.
What’s the risk of being killed by Covid-19? Undercover Economist Tim Harford does the maths: it’s roughly similar to “taking a bath, going skiing, or a short motorbike ride, and considerably less risky than a scuba dive or a skydive”.
Final thought
Few people are better qualified to see “the big picture” of the planet’s travails than an astronaut who has spent 200 days looking down from the International Space Station. For Samantha Cristoforetti, Covid-19 is further proof of our fragility. “As a species, we’re so temporary, transient — we could be gone and the Earth would just keep on moving,” she said. “There’s nothing permanent or inevitable about us.”
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Traditional retail faces knockout blow from pandemic - Financial Times
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