Amazon To France: Bisous

Plus: Are buy-now-pay-later apps the layaway canary in the recession coal mine ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

April 19, 2023

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TOGETHER WITH

Good morning.

David Solomon will be on the lookout for cannibals.

With Goldman Sachs officially partnering with Apple on a new high-yield savings product, the megabank CEO is more than aware that Cupertino’s new CD offering might be seen as competition with his embattled consumer business. But while he assured analysts on his company’s quarterly earnings call Tuesday morning that he was not immediately concerned, Solomon did pledge to spend the free time he has left after his oenophilia and disk jockeying to keeping an eye on the situation, saying “we’ll obviously watch closely to see whether or not there’s any cannibalization.” Always a good plan if you’re asking us.

Morning Brief

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Amazon goes on a French charm offensive.

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Buy milk now, pay later, and hope nothing spoils.

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NYC hearts millionaires.

E-Commerce

Amazon Wants to Win Over France With PR Project “Ratatouille”

What, was “Project Baguette Beret” taken already?

Bloomberg reported Tuesday that Amazon is running a PR operation in France codenamed “Project Ratatouille.” Amazon’s international business has been historically indifferent to profits as it hoovered up market share, but the new francophile PR drive suggests Amazon’s days of subsidizing its overseas businesses may be headed for the guillotine.

Quelle Horreur

Taken as a whole, Amazon’s international business has been unprofitable for years, but on the company’s Q3 earnings call last year CFO Brian Olsavsky said more mature markets like European countries and Japan were showing individual profits. France, however, has lagged neighbors like Germany and the UK. Simultaneously, Amazon has faced the same macroeconomic reckoning as its fellow tech luminaries, so it can’t afford to simply burn cash at the altar of growth anymore.

“International sales for Amazon are still less than 25% of its total sales,” Maureen Hinton, a retail analyst at GlobalData, told The Daily Upside. “With post-COVID returns to physical stores and its maturity in its home market, the US, it makes sense to do whatever it can to build sales in the major European economies.”

Sources told Bloomberg that Amazon is hitting every button it can to try to court French consumers, and one source said it was inspired by McDonald’s adding a more gourmet flair to its menu items in the 1990s to penetrate the French market. Amazon might face a more uphill battle than McDo (as it’s affectionately known in France) did 30 years ago:

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France’s labor laws have not always worked in Amazon’s favor. During the pandemic, a union successfully forced Amazon to shut its French warehouses for five weeks to address COVID-19 safety concerns.

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In 2021 Amazon missed its own targets for packages delivered from its French warehouses, and a study from consumer data company Kantar showed that the company actually lost market share from 2019 to 2020. That’s a shocking result given 2020 saw a lockdown–fuelled boom in e-commerce, from which France was no exception.

“As we have seen with the current demonstrations in France, regarding pension reforms, the French are very protective about their rights, especially employment rights,” Lipton said. “While Amazon is the leading online business in France, as a US company with US work attitudes, it has to overcome negative socio-political attitudes towards it.”

Left Holding The Fleabag: Amazon’s international business isn’t the only one with delivery issues. Earlier this month The Hollywood Reporter reported Fleabag creator and Killing Eve writer Phoebe Waller-Bridge, who Amazon signed on in 2019 with a three-year contract worth $60 million, has yet to produce anything for the company. Maybe Waller-Bridge will give a look down the camera and explain her creative process one day.

– Isobel Asher Hamilton

Fintech

A Fifth of BNPL Clients Use Fintech Apps to Pay for Groceries on Installment Plans

(Photo Credit: Maria Lin Kim/Unsplash)

More like eat now, pay later.

In a sign of the times, a recent survey from LendingTree found that 1 in 5 buy-now-pay-later service users in America purchase their groceries with the aid of fintech providers such as Klarna, Afterpay, and Paypal. While consumers putting luxury purchases like Pelotons, Prada bags, and Playstations on BNPL apps has fueled their growth, the new economic reality of users putting essentials on tech-enabled layaway has the potential to go rotten for everybody involved.

You Gotta Eat

During the pandemic, spending through BNPL companies surged on items like clothes, appliances, and electronics as locked-in consumers indulged in retail therapy. It didn’t hurt that most BNPL companies don’t charge interest and that Wall Street investors took notice of their popularity.

But with the high-flying economy hitting some rough air, thanks in part to surging inflation, many cash-strapped shoppers are now using their installment apps to buy even the most basic stuff. More than 1 in 5 users, often living paycheck to paycheck, say that without BNPL they couldn’t afford their monthly eggs, meat, and vegetables. “I can’t just buy groceries out of pocket like I used to,” 34-year-old administrative assistant Faith Smith told Bloomberg. “It helps for a week or two, but then you’re stuck with a grocery bill for a couple months.”

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In 2019, five of the main lenders in the US originated loans worth $2 billion, according to the Consumer Financial Protection Bureau. By 2021, it had shot up to $24.2 billion. That’s great for the BNPL sector, but it coincided with historically low interest rates and relatively soft inflation. The reality has changed, but consumers have yet to fully adjust.

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According to the LendingTree survey, 32% of BNPL customers who earn $100,000 or more say they use their loans as a bridge from paycheck to paycheck. Using that reasoning, it would not be a shock to see them falling behind on payments or ditching BNPL services altogether, an outcome that would adversely affect the lenders backing BNPLs, and the retailers that use them to boost sales.

Too Sharp: “High interest rates are a double-edged sword. On the one hand it will encourage more consumers to embrace BNPL over other forms of credit like credit cards because the interest-free rate periods of BNPL become more attractive in a high-rate environment,” Richard Wray, COO at payment processor Carta Worldwide, told Fintech Global. “On the other hand, it puts a squeeze on BNPL providers raising money to lend from the debt market.” Either way, it’ll make it harder to defer the pain.

–Griffin Kelly

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Wealth

NYC Tops the Millionaire Charts

It’s official: the Big Apple is the Richie Rich capital of the world, with more millionaires than Cincinnati has residents.

New York has held on to its title as the world’s wealthiest city in 2022, according to the rankings devised by investment migration consultancy Henley & Partners. But while the city was reportedly home to 340,000 millionaires last year, even objectively wealthy New Yorkers were feeling the financial pinch of living in the millionaire’s playground that never sleeps.

Economic Fairytale of New York

Around 4 million pigeons also live in NYC according to New York-New Jersey Wildlife Removal, which would mean the city’s millionaire population is around 8.5% of its pigeon population. That’s a pretty high density and a feather in NYC’s cap given it’s losing ground in some other demographic areas. Earlier this year, it lost the top spot on the Bureau of Statistics’ rankings of total jobs to Florida.

Meanwhile, on the slightly-less-wealthy-but-still-pretty-wealthy end of the spectrum, all’s not entirely well:

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An analysis this week by SmartAsset found that, in terms of purchasing power and adjusting for the local cost of living, NYC workers on six-figure salaries need to make $300,000 in order to feel like they’re making $100,000.

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SmartAsset’s analysis suggested someone making $125,000 in Houston, Texas would have the same purchasing power as someone making $312,000 in NYC.

While NYC has the most millionaires, the Bay Area has the most billionaires according to Henley & Partners. In case you were wondering, San Francisco has similar problems with relative purchasing power, according to SmartAsset.

Billionaires Bite Back: While 2022 saw the world’s ten richest individuals lose a collective $575 billion as shares plunged and ominous mutterings about a possible recession did the rounds, 2023 has seen the planet’s ten wealthiest billionaires regain $213 billion in net worth, so just another $362 billion to go. No biggie.

– Isobel Asher Hamilton

Extra Upside

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Apex predator: A T. rex skeleton sold for more than $5 million at auction.

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Tough talk: MillerKnoll CEO tells employees to ‘leave pity city’ when they ask about canceled bonuses.

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