Holiday spending rebounds despite inflation / Deep Dive: Ford deal fuels Zegna's luxury ride / Survey: Walmart leads holiday shopping

Plus, China limits gaming spending, tech giants hit

Inside Business For December 27, 2023

Here's your daily business briefing. 🎄 Holiday spending rebounds despite inflation 🤝 Deep Dive: Ford deal fuels Zegna's luxury ride 🛒 Survey: Walmart leads holiday shopping Make sure to continue reading the Earnings Report and the Quick Hits. Thanks for reading!! Shriram p/Shriram

1 Mastercard SpendingPulse reports a 3.1% rise in U.S. retail sales from Nov. 1 to Dec. 24, reflecting robust spending as many consumers waited until the last minute, expecting price drops and seeking discounts. Online retail sales increased by 6.3% yearly, while in-store sales, excluding automobile purchases and travel services, rose by 2.2%. More: Sales of jewelry and gadgets declined, but restaurants enjoyed robust growth due to rising menu pricing and an increase in dine-out business. Although there was a slight decrease in expenditure on gadgets and appliances following pandemic-related purchases, overall spending stayed high. The labor market in the U.S. is still robust, but consumers must contend with growing credit card debt and shrinking savings. The National Retail Federation projects that, excluding specific categories, holiday sales will increase by 6% to 8% to reach $942.6B to $960.4B between Nov. 1 and Dec. 31.

2 What the numbers say: Asia, particularly China, remains crucial ($711M in sales in 2022 from the APAC region), and there's a decline in optimism among high net-worth consumers, challenging Zegna's rebranding efforts. Zegna aims to enhance its luxury business by leveraging the acquired Tom Ford brand, with plans to double Tom Ford stores to 100 and achieve over 10% annual revenue growth for Tom Ford International. Relevance: Tom Ford's acquisition is crucial for Zegna's shift to a modern, high-end fashion brand, moving away from traditional men's tailored suits. With a successful emphasis on "leisure luxury" in the U.S., Zegna aims to replicate this in China, leveraging Tom Ford's status as a top 25 fashion brand to expand into accessories and womenswear. More: Under CEO Ermenegildo Zegna, the company has aggressively expanded with acquisitions in the last five years, targeting over 10% annual revenue growth. Despite slower cultural change communication to China due to COVID, Zegna remains optimistic about Asia, especially the Tom Ford brand, positioning itself as a luxury brand aggregator, with no deal discussions expected in 2024 but openness to opportunities thereafter.

3 According to an Ipsos survey of over 800 people, Walmart leads recent holiday purchases with 25% of respondents, outpacing Target (9%), Kohl's (7%), and Macy's (3%). One-third planned to increase their holiday shopping budget despite constraints, with 20% shopping on Black Friday, 45% before Black Friday, and 35% after. More: According to an October Deloitte survey, customers anticipated their holiday purchasing budgets would increase by 14%, or $1,652. Walmart offered discounts on various products during their early October "Walmart Deals — Holiday Kickoff" and other early holiday deals. Walmart's "Walmart Deals — Ready, Set, Gift" event from Dec. 13 to Dec. 21 offers discounts on electronics, cookware, toys, and home goods, targeting last-minute shoppers. The previous year's top three in-store holiday shopping destinations were Walmart, Target, and Amazon Go or Amazon Go Grocery. Adobe Analytics predicts 51.2% of the holiday budget will be spent on mobile devices, with online sales between Thanksgiving and Cyber Monday growing by 7.8% to $38B from the previous year.

4 China's new draft rules curbing online gaming spending caused significant share declines for major tech companies. Tencent, a leading gaming firm, experienced its worst drop since October 2008, losing $47B in market value, while NetEase saw a 25% plunge, wiping out $16.4B in its most considerable daily loss since June 2020; Bilibili dropped 9.7%, and Kuaishou fell 7.2%. More: The National Press and Publication Administration's draft rules for online games mandate spending limits and prohibit practices like daily login rewards that encourage high spending. The prohibited practices include auctions, giving large gratuities to gamers who broadcast their games, and any other activity that could lead to the high-priced sale of virtual items. The rules require game publishers to maintain data locally and strongly emphasize gamers registering under their valid names. As China continues its crackdown on gaming addiction among youth, the recent measures, building on restrictions from August 2021, target the online gaming industry.

5 Here are the quarterly earnings reports for the following companies, released in December:

6 Generative AI, like ChatGPT, is set to influence $194B in spending this holiday season, with $51B influenced during Cyber Week through features like personalized product recommendations. Retail leaders such as Walmart, Target, and Nordstrom utilize AI to forecast demand, predict out-of-stock items, and enhance productivity. More: Around 17% of consumers use early personal assistant AI tools, such as ChatGPT, for tasks like gift selection and outfit creation, finding them helpful for product research and inspiration. Google's Bard and Walmart offer virtual try-on features for clothes, while Kohl's and Simon Property Mall experiment with AI-powered personal shopper tools. Consumer electronics like the Google Pixel 8 and Meta's high-tech glasses with Ray-Ban offer AI features, but sales have experienced a lull. AI-enabled goods are available at Best Buy, but innovation — including generative AI — is predicted to propel consumer electronics sales back up in the second part of the year.

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Shriram Jeevakumar Freelance Writer Shriram is pursuing Master’s in Business with Marketing at Warwick Business School. He worked as a Senior Consultant in Tech and Political Consultancies before his Masters. He is passionate about Tech, Marketing, Strategy, Anthropology and Politics. He is also the Postgraduate Ambassador for Warwick Business School. This newsletter was edited by Aaron Crutchfield

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