• Chris Simpson

Juneteenth/ E-Commerce Wars- Weekly Market Update June 19,2020

“Delivery and E-Commerce Wars”

On this day in 1865, Union general Gordon Granger read federal orders in Galveston, Texas that proclaimed that all previously enslaved people in Texas were now free. Although the Emancipation Proclamation has formally freed slaves about 2 and a half years earlier, this served as a defining moment for the movement as Texas was one of the most remote slave states with the lowest presence of Union troops.

Despite the progress that has been made since 1865, there is still room to grow. Specifically, a more level playing field is needed in terms of asset ownership and income as the racial wealth gap in America is still quite significant.

CLICK HERE to check out an interesting visual that shows the breakdown of asset classes held by each ethnic background.

Now, let’s take a look at some key events that transpired this past week.

Airbnb fights systemic racism

Fighting systemic racism is not an easy task because it can be very difficult to accurately define. For example, an Airbnb host cancels on a client who happens to be a person of color. There is no way for Airbnb to proclaim confidently that this cancellation was racially driven and not motivated by something else (or nothing at all).

Additionally, unlike hotels (who are forced to accept guests if they have the money) Airbnb can’t force people to let guests stay in their home. That said, Airbnb has already removed some 1.3 million users for “declining to treat others without bias”.

Airbnb also announced Project Lighthouse. This is an initiative to gather data on user behaviors to measure discrimination. From there, it will be able to better tweak its platform to prevent discrimination.

A few potential ideas include:

● Creating a stronger emphasis on users’ ratings over other aspects.

● Hiding profile pictures or demographic information until a booking is accepted.

● Educating their users on what type of behavior will lead to their account getting suspended.

Gathering more data is crucial in solving this problem and Airbnb has promised to publish their findings to help others in the Gig economy fight discrimination.

Grocery delivery coming in hot!

It should really be no surprise that grocery delivery companies (like Instacart, Grubhub, UberEats, and Doordash) are thriving right now. They have the two most important coronavirus boxes checked off:

1. Essential - These companies deliver food. Restaurants have been deemed an essential business and allowed to continue operating during the quarantine. If they had built their businesses around delivering something non-essential (furniture, flowers, etc.) then they probably wouldn’t be doing as hot.

2. Social distancing - While restaurants are allowed to operate, they still can’t have people gathering in their store. Instead, they can do takeout or delivery. Sounds ideal if you’re a company that delivers food!

Instacart and Doordash dominate the space and are both gathering new funding to fuel growth right now. Instacart just raised another $225 million to get to a $13.7 billion valuation. Doordash is also closing another round that would boost its valuation over $15 billion.

ECommerce Wars - The Battleground Rages

We already have the Streaming Wars, where Netflix, Hulu, Amazon Video, HBO Go, and Disney+ are going toe-to-toe to earn your streaming subscription dollars.

There’s also the Delivery Wars (see the previous section) where Instacart, Doordash, Grubhub, and UberEats knock each other over for the honor of delivering your food.

It’s safe to say that we are now entering the ECommerce War (Which has been dominated by Amazon for quite some time so it hasn’t been much of a war). However, that might be about to change.

Key Alliances:

● Amazon - Requires no backup.

● eBay - Still around, but not really.

● Facebook + Shopify - Teamed up to offer Facebook Shops.

● Walmart + Shopify - Now teaming up to offer Walmart Marketplace.

Amazon’s power comes from owning the marketplace. Instead of being the most successful store in the mall, they own the mall. Now, other vendors are trying to team up to create their own marketplaces.

Speaking of owning the marketplace

The European Union is not happy with Apple and just launched two anti-trust probes into the Apple store and Apple pay. The E.U. claims that Apple uses anti-competitive tactics to promote its own products in its own stores. For example:

● Apple owns the Apple store and on the Apple store, they sell an app called Apple music (which they also own). Apple Music is listed as the #1 app in the music section while Spotify is listed at #5 even though Spotify is arguably more popular.

The E.U. thinks this type of situation is anti-competitive.

The E.U. doesn’t like American tech in general. Mainly because companies like Facebook, Amazon, and Google make lots of money off of European users without (here’s the bottom line) paying any European taxes.

That’s it for this week -- Join us next week for another market update.

Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc.

This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.

All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

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