Charlotte Street Partners

DAILY BRIEFING

DAILY BRIEFING

Amazon runs free

Written by Ralitsa Bobcheva, associate
Edited by Harriet Moll, creative director
15 October 2020

Good morning,

Back in 1995, in a basement in Seattle, packing paperbacks into boxes alongside his wife and a handful of employees, a skinny entrepreneur laid the foundations of an online bookselling business.

These were the humble beginnings of what is today known not just as the bookseller but digital conglomerate Amazon and its founder Jeff Bezos. 

In 2020, Bezos is the richest man in the world and CEO of a company which employs over one million people worldwide. The company’s dominance in the digital marketplace is indisputable, with a 2019 research by Mintel finding that nearly 90% of UK shoppers use Amazon and 40% have its Prime subscription service and that was before the Amazon received an unexpected prime delivery in the shape of the pandemic lockdowns. The research findings all that time ago also concluded that in spite of online retailing’s popularity, 82% of all retail sales in the UK still come through physical stores.

If Amazon’s growing dominance was already a major cause for concern to physical store owners prior to the pandemic outbreak, the lockdowns of recent months have triggered a boom in digital sales, with ecommerce sales in the UK raising to nearly a third of all retail sales by May.

Representatives of the British Independent Retailers Association recently launched a campaign encouraging consumers to shun this week’s Amazon’s Prime extravaganza and consider using small retailers that need support “more than ever” instead.

Amazon’s ever-growing market dominance has not gone unnoticed by government ministers. In April, the UK government attempted to introduce a digital services tax which would make tech giants pay 2 per cent tax on revenues from online sales, thus making “global giants with profitable businesses in the UK pay their fair share towards supporting our public services”. 

Hence the anger and dismay which ensued yesterday when The Times first reported that Amazon, whose total British tax bill last year amounted to just £293 million, will not have to pay the levy but will instead pass it on to the small and independent traders using its digital service.

Needless to say, this will result in small sellers paying more and counter intuitively contribute to establishing Amazon’s marketplace dominance in the UK. And while there are still a few products that cannot be found on the Amazon platform (full-size homes, cars, cigarettes and live animals, to be more precise), the tax will grant the digital jack-of-all-trades even more competitive advantage.

Which once again leaves everyone with the burning question: how can pandemic-struck small and independent retailers – the likes of Bezos’ very own Amazon back in 1995 – compete in an increasingly challenging market environment? 

News

Support for independence has reached a record high of 58%, the latest Ipsos MORI poll for STV News has found. According to the poll’s findings, just 42% of Scots now back staying in the UK, while 58% would vote to leave, once undecided voters are removed. Including undecided voters, 55% of people would vote Yes if there was an independence referendum tomorrow, 39% would vote No while 6% said they didn’t know.

People in parts of the UK with high rates of Covid-19 will be banned from travelling to Wales, the Welsh First Minister, Mark Drakeford, has announced. From Friday 16 October, people who live in tier-two and tier-three areas in England that are classified as “high risk” and “very high risk” will be banned from travelling into Wales.

Ministers are drawing up plans to place universities in England into lockdown for two weeks from 8 December until 22 December, with all students allowed to return to their hometown and teaching carried out entirely online. The move is set to deliver on Boris Johnson’s pledge to “get students home safely for Christmas” while preventing the spread of Covid-19.

In a televised announcement read out by the police, the Thai government announced urgent measures to stem largely peaceful protests in Bangkok, including a ban on large gatherings. Following the announcement of the decree, the police arrested several activists, including three key protest leaders.

Facebook and Twitter took steps to restrict a controversial New York Post story on Joe Biden, in a move that sparked outrage on the right and a heated debate over the ways in which social media platforms should deal with disinformation ahead of the US election.

Business and economy

Prime Minister Boris Johnson will not walk away from Brexit negotiations today, despite the 15 October deadline for reaching a trade deal with the EU. A Number 10 spokesperson has confirmed that the Prime Minister will not decide whether an agreement with the bloc is possible before today’s EU summit in Brussels.

German, Italian and French business organisations urged EU leaders to strive for a trade deal with the UK amidst concerns that talks remain stalled on a number of fronts. The three leading European business associations warned that the outcome of a no-deal could entail a number of “cascading consequences” including tariffs, delays and blockages. (£)

France and Netherlands have joined forces to back an EU move against the growing dominance of US tech giants. In a joint paper, the two countries call for the EU’s competition authorities to take pre-emptive measures to curb the companies’ market power, including forcing tech giants such as Facebook and Apple to allow their users to take their private data to a competing platform. (£)

Columns of note

This week, the government’s now infamous retraining ad campaign — suggesting, for instance, that a ballet dancer should retrain in IT – has sparked a wave of responses across social media and beyond. In City A.MMartin Jones argues that amidst the intelligible outrage the campaign has caused, something has got lost in these adverts – that far from a mere plan B to ones’ dream career, retraining should be seen as a door to a new and exciting world of opportunities.

As the war in Nagorno-Karabakh unveils before the world’s eyes, Anoosh Chakelian’s catches a glimpse in it of her own history – the displacement of Armenians from their ancestral homes. Writing in the New Statesmen, she points out that then as now, the world was distracted by a global crisis which allowed Armenia’s more powerful neighbours to act with impunity.

Cartoon source: The Telegraph

Markets

What happened yesterday?

Wall Street finished weaker on Wednesday, with the Dow Jones Industrial Average falling 0.58% to end at 28,514 points, while the S&P 500 lost 0.66% to 3,488.6. The Nasdaq Composite also went down 0.8% to 11,768.73.

In London, stocks closed in a mixed state amid growing concerns about the prospect of tighter lockdown restrictions. The FTSE 100 ended the session down 0.58% at 5,935.06, while the FTSE 250 gained 0.33% to 17,950.41.

The pound was in stronger position, advancing 0.73% against the dollar to trade at $1.3031, and gaining 0.59% on the euro to €1.1079.

In company news:

WeWork parent firm The We Company has dropped its “We” moniker and returned to its better-known name Wework, in a bid to “strengthen its foundation”, in the wake of the pandemic.

Restaurant chain Gourmet Burger Kitchen has been bought by Boparan Restaurant Group in a deal that will rescue the company which has been in trouble since November 2018 when it entered a Company Voluntary Arrangement.

What’s happening today?

Interims
Allied Minds

AGMs
BHP Group
Malvern Int Plc
Mercantile Ports & Logistics
Sosandar
Srt Marine Sys.

Trading announcements
Discoverie Grp.
Hays
Mediclinic International
Mondi

Int economic announcements
(13:30) Continuing Claims (US)
(13:30) Import and Export Price Indices (US)
(13:30) Philadelphia Fed Index (US)
(13:30) Initial Jobless Claims (US)
(16:00) Crude Oil Inventories (US)

Source: Financial Times

did you know

Jeff Bezos’ initial idea was to name the company Cadabra, as in “abracadabra.” He changed his mind, however, after his lawyer told him that the magic reference was too obscure, and when you say it out loud, “cadabra” could be mistaken for “cadaver”. 

Parliamentary highlights

House of Commons

Oral questions
Various
 
Business Statement
Business Questions to the Leader of the House – Mr Jacob Rees-Mogg
 
Legislation
Covert Human Intelligence Sources (Criminal Conduct) Bill: Consideration in Committee and remaining stages
 
Adjournment
Eviction of Ministry of Defence tenants – Stephen Crabb

 

House of Lords 

Oral questions
Various
 
Legislation
Parliamentary Constituencies Bill – third reading – Lord True
 
Legislation
Trade Bill – committee stage (day 6) – Lord Grimstone of Boscobel

 

Scottish Parliament 

First Minister Statement: COVID-19 (Virtual)

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