In this podcast, Motley Fool analyst Jason Moser and host Deidre Woollard discuss:
- Black Friday's strong results.
- The rise of mobile shopping.
- If anyone can challenge Amazon's reign as the holiday leader.
Ariel Adams, founder of aBlogToWatch, talks with Motley Fool employee Alex Friedman about the luxury watch market.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. To get started investing, check out our quick-start guide to investing in stocks. A full transcript follows the video.
This video was recorded on Nov. 27, 2023.
Deidre Woollard: It's Cyber Monday. Are people clicking Add to Cart? Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Deidre Woollard here with Motley Fool analyst Jason Moser. Jason, how was your Thanksgiving?
Jason Moser: It was wonderful, Deidre. Lots and lots of food, lots and lots of football, lots of rest. It was the trifecta of winning there. How about yours?
Deidre Woollard: Pretty good. Thank you. The holiday part is over, and now the shopping part has began as soon as the stores opened on Friday. At least they're not opening on Thursdays anymore, for the most part. I don't know about you, but I get sceptical about Black Friday and Cyber Monday, it feels like it's made-up holidays to promote consumerism. But man, the deals are tempting me this year. There are some deep discounts. How about you, are you tempted?
Jason Moser: There are some deep discounts. I have been tempted and I actually already made at least one purchase because my wife explicitly told me what she wanted this year, which really took a lot of stress off of me because I'm every year trying to figure out exactly what do I get her. Thankfully, this year it sounds like I've gotten her exactly what she wanted. It feels like Black Friday and Cyber Monday were certainly more meaningful several years back. If you go back and you listen to Market Foolery, for example, our podcasts that we used to have here for many years. In every year with Market Foolery, we'd certainly watch that trend play out in real time. We talk about the fact that these holidays just kept getting longer as opposed to just being one day, now it feels like every day is almost Black Friday, Cyber Monday. You've got Amazon pulling levers with Prime Day every year right now going into multiple Prime Days per year. It does feel like it's a little bit less meaningful, just in regard to this specific day. If you look at that Shopify data, you mentioned people shopping earlier and earlier, Shopify data survey they did in partnership with Gallup, found that Americans in particular actually are starting earlier than ever. Forty-one percent said they started shopping in October, and another 39% said they're going to be shopping at the beginning of November. This is for the holiday season. There's no question that the consumer is starting earlier and earlier and that just is a trend that keeps continuing on.
Deidre Woollard: I find it funny that they still call it Black Friday when it's already starting way ahead of that. They're still attached to the name. It is very interesting because you mentioned Amazon and Prime Days, those are in early October, so people get started now, and yet there's still this need to continue to juice the results, and it works. Adobe Analytics, they had their data that came out on Black Friday spending. People spent almost $10 billion online, up about 7.5% year-over-year, which really surprised me, and so much of that now, just over half of it is coming from people shopping on their phones. Cyber Monday used to be, you go to the desktop or the laptop, now you just whip out the phone. It's a whole different world, isn't it?
Jason Moser: It is. It's a much different world. We've been very critical of businesses that have put that mobile strategy on the back burner, they're really paying the price now. Remember, years ago, that was one of the big question marks in regard to [Meta's] Facebook, making that leap from desktop to mobile and there was skepticism that they could do it, who's going to want to fiddle with all of that stuff on such a small screen? But what we've seen very quickly is the companies that were thoughtful about this that started early really have been able to capitalize and it's everywhere from retail to social media to pizza. Look at Domino's and Papa John's. Probably not number 1 or 2 on my list if you're giving me the choice of pizza, but they're perfectly fine options, very convenient, and their apps make it so easy to buy. Just the mobile experience is one that has really taken front and center and I suspect that will continue.
Deidre Woollard: Well, and this relates to your war on cash too because it's the fintechs that are making all of this happen. If I had to sit there and plug in my credit card every single time that I wanted to buy anything on my phone, I would not do it.
Jason Moser: No. I think most people would agree with you, I know, I certainly would. Payments is clearly a big point of focus in any mobile strategy. What we've seen as this has evolved, it's companies that are putting all of their eggs into one payments basket, that's likely leaving money on the table. There's plenty of evidence out there that shows that customers who get all the way to checking out, they've got their shopping cart full, they're ready to check out, if their preferred payment option is not there, or if there's too much friction in the payment process, those shopping carts are often abandoned. There's plenty of data to support that, and so these companies are going back to the drawing board and saying, you know what? We're not just going to saddle up with Apple Pay, we're not going to just saddle up with PayPal, we're going to do it all. Then what's even more interesting is to see things like Apple with Apple Pay bringing more partners into their ecosystem, bringing PayPal and Venmo into the Apple wallet. Google wallet doing the same thing with PayPal and Venmo. You got Venmo on Amazon. You see, companies like Shopify really benefiting from building out that payment solution. They talked about Shopify from the third quarter alone. This doesn't even have anything to do with the holiday season, $32.8 billion of gross merchandise volume was processed on Shopify payments in the third quarter. That was up 31% from a year ago. Now, Shopify payments is powered by Stripe, but the point remains, providing that frictionless payment solution makes all the sense in the world. Etsy, doing the same thing. Etsy payments reaching into new international markets, in offering every payment option under the sun. It really does feel like the companies that are focused on giving consumers as much choice as possible are likely going to benefit the most.
Deidre Woollard: Etsy is one of those that, boy, I saw a lot of Etsy ads. [laughs] They're trying to make it this time. Let's tear in on Shopify a little bit because they put out some data, good Black Friday for them, new record, 4.1 billion in sales. They also have this fun tool on Shopify, it's like a Black Friday, Cyber Monday thing where they have a globe and it shows you all of the sales pinging back and forth. It's fun. But one of the things they reported that was interesting is that 15% of the sales are cross-border. Black Friday and Cyber Monday traditionally a US thing, but it seems to me like we're exporting our consumerism, aren't we?
Jason Moser: Yeah, I think so. I think that's fair to say. Part of the goal with retail in general is to open yourself up to the largest market opportunity possible. It's a big world out there. I think phrases like fire sale and deep discounts translate universally. But I mean, look at it from a global perspective in steering away from our Black Friday Cyber Monday stuff. Look at Singles' Day across much of Asia. That has obviously, been a very popular event in Asia, but it's starting to work its way more and more into Europe and here in the US. Cross border, that phrase right there, just that term cross border, always a big point of the conversation with Visa and Mastercard earnings all year round, not just the holidays but all year round. Those companies are witnessing tremendous growth in transactions and dollar volume being spent cross-order. Then just a funny little story I found in digging into this a little bit, the story I found on Slate earlier, there's this Plaza Lama, it's a home goods and grocery store in the Dominican Republic. They're pushing these sales all November along. Now, the founder of this superstore, it's a Dominican superstore is what it's called. The CEO, I'm sorry, of Plaza Lama said in an interview, they started hyping Black Friday back in 2013, when that term was not something that was really used across retail in the Dominican at all. But the reason he saw around that corner was he realized the popularity that it was gaining here in the US and recognizing that following the US's lead in regard to retail consumerism, there could be some benefit to that, and certainly Plaza Lama is witnessing benefits from that as well as participating in this holiday season.
Deidre Woollard: Let's talk a little bit about Amazon because we can't talk about all these holidays without talking about Amazon. We already mentioned that they started it off with Prime Days. Now there was a report in the Wall Street Journal. They're basically the biggest shipper in the country now. It's not UPS or FedEx leading the charge, it's Amazon. Is there anything you think that could ever stop the rush of Amazon? I mean, we're all so engaged in it now as part of our shopping experience. I mean, if Etsy tries to take a share of it, everything Walmart's trying to take a share of it. Is there anyone is there anybody that can ever come for the throne?
Jason Moser: Well, if I would think at some point or another, yes. Now. I mean, it may not happen in our lifetime. I mean, yes, I don't think you can ever discount Walmart's ability to gain a share in the space. I mean, Walmart is traditionally brick and mortar and something that feels like it was from a generation ago. But if you're paying attention, then you know, Walmart is making progress in this space by leaps and bounds. It's to me, scale-wise, it's one of the most obvious threats or competitors out there. Target has done a very good job with its shipped acquisition through the years and being able to focus on that omnichannel consumer. I guess when it comes to Amazon, two things that stand out as threats. Number one is just its regulation. I think we seem to be under an antitrust microscope and who knows exactly how that's going to turn out? That always is something just to keep in mind. But then I think also it's not death by 1,000 cuts, but maybe it's just stealing away sales by 1,000 cuts. I think you've got your Shopify and Etsys of the world that enable the small business owner and I think that's something that will continue to take incremental share from a company like Amazon. That's not necessarily a bad thing. We talk about retail, it's just a massive market opportunity. But then, another trend that we continue to see in these earnings calls, with a lot of these retailers, is the acronym BOPIS, B-O-P-I-S and that is bought online, pick up, and store. That is becoming a more attractive option for a lot of folks as well, which certainly opens them up to a universe well beyond just Amazon. So again, not death by 1,000 cuts, but there are 1,000 cuts here that could certainly take away some share from Amazon.
Deidre Woollard: I think the things with Amazon that I watch are that they can't quite figure out grocery, they can't quite figure out fashion. The other thing I watch is the rise of Livestream Shopping, which is not big here in the US yet, but huge in other countries. Amazon is trying it. They've hired influencers to do some of it, but they don't quite seem to get it. I think that's an area that I'm looking at too.
Jason Moser: I wonder if that livestream shopping thing, it may be, could be a generational thing. Where it's just not necessarily in their circle of competence so to speak. I mean, another space I think that has proven very resilient is home improvement. You look at your home depots and lows of the world and I mean, where Amazon came from and it just didn't work yet. I think a lot of that just had to do with those companies' responses regarding mobile, regarding omnichannel. I mean, meeting the consumer where the consumer wants to be met. But Amazon laid the blueprint for a lot of this, right? A lot of these companies have succeeded thanks to Amazon. So I think that needs to be said.
Deidre Woollard: I know one of the things that you study, is you study the consumer overall. You've talked before about consumers feeling strained, and the end of the student loan forbearance. Now you've got things shifting. People are using buy now, pay later, a lot more and that is worrying me. I don't know, is that worrying you? I look at companies like a firm and others like that, I stayed away from those. What do you think about the buy now, pay later Boom?
Jason Moser: Buy now, pay later is one of those things. It seems like it's just a credit card with a different name. I think that it is a sensible offering as long as it's used appropriately. I mean, just like credit cards, I think buy now, pay later is something where you can overindulge and put yourself behind the eight ball. But there's no question. I mean it is contributing to record sales this holiday season. I think it's set the projection here for Cyber Monday, is that buy pay later. Adobe predicts that it hit $782,000,000 up nearly 19% from a year ago. It's an alternative that consumers appreciate now whether that's just the perception that they don't feel like they're getting raked over the coals by a credit card company or whether it, actually is something that helps them structure their payments a little bit more easily, I think any which way you look at it. If it enables customers to spend and retailers to sell, then it's a value. I mean from the investing perspective I don't know that I'd want to pure-play by not paying later firm as an investment mind. But I do think as a part of the bigger hole. It makes sense as a part of the strategy. You block PayPal and Visa, Mastercard, all these companies that are offering now-pay-later options. I think that makes a lot of sense because that's just one piece of their business and they're not, again, putting all of those eggs in one basket.
Deidre Woollard: But do you think that the consumer is going to slow their role? I mean, Black Friday is so far known Cyber Monday will know in a few days certainly. Then we'll have to wait for the after-Christmas sales and all of that. Do you think we'll start to see a little weakness or are People just going to spend until they can't spend any more?
Jason Moser: Probably the ladder there, yeah. I've said it before. You can never underestimate the American consumer's ability to spend irrationally. I mean, it is just, it's almost amusing at times because when you look at the data out there, right, I mean, you've got as of October, 60% of adults saying they're living paycheck to paycheck. Consumer confidence is still challenged. We're going into an election year next year when you know this stuff is going to be a big point of focus. Credit card debt tops $1,000,000,000,000 you get 96% of shoppers still say they expect to overspend this holiday season. Half of consumers plan to take on more debt for these expenses, right? 74% of consumers are stressed about their finances. I think that's a funny statistic because it should be 100. I feel like finance, we all stress about our finances. But, the point is, it just seems like one of the greatest examples of cognitive dissonance in the history of mankind. I mean, everything is working against you and yet you're still going to go over, spend, and take out debt to do it. The American Consumer is a unique being. It just seems like once the holiday season rolls around, sensibility and logic just fly out the window and we want to figure out a way to get it.
Deidre Woollard: Yeah. Absolutely. Well, the holidays roll on. Thanks for bringing this out with me today, Jason.
Jason Moser: Thank you.
Deidre Woollard: The analysts you hear on the show have a whole other day job providing premium coverage and recommendations for the Motley Fool suite of stock investing services. We're giving our listeners a discount on Motley Fool's flagship service. It's called Stock Advisor. If you're interested in more analysis from our team, two stock recommendations per month and access to Stock Advisors' full scorecard of companies is it www.fool.com//mfmdiscount. What's in a Watch? Alex Friedman caught up with Ariel Adams, founder of aBlogtoWatch, to discuss the luxury watch market, Rolex's hold over wealthy consumers, and Apple's impact on the industry.
Alex Friedman: I'd love to go into depth with you about some of the changes we've seen in the luxury watch market. But before we do, I think that we can't talk about the elephant in the room when it comes to watches, which are Apple and the Apple watch which they released in 2014. Since then, Tim Cook has talked about how they're now the largest watch producer in the world. I guess I'm curious for you Ariel, where you said, how do you see the development of the Apple watches impacting and changing the watch industry.
Ariel Adams: When the Apple watch first came out, it caused a lot of fear in the traditional watch industry. They were very fearful that it was an attack on them. That People were going to be buying Apple watches and not traditional watches. A lot of the way that happened, but what I quickly identified at the time that it was going to create a new level of awareness of watches in the mainstream and that level of awareness always opens up for a luxury segment. So the popularity of the Apple watch almost guaranteed a thriving luxury segment. I wrote about that years ago, and that's actually, turned out to be very true.
Alex Friedman: Why do you think that so many people have gotten into watches over the last couple of years?
Ariel Adams: Well, the short answer is it's a hobby that you can enjoy almost entirely online. You can learn about watches online, and chat with other People who like watches online. You can buy watches online, you can sell your watches online and you can basically, participate in a lot of media thanks to myself, my company, aBlogtoWatch, and some others. Because everyone is stuck at home during the pandemic, and a lot of People, not everyone, but a lot of People, had extra income to spend. It was really the perfect thing for that type of lifestyle. Then on top of that, you had some watches that now were being perceived as assets unto themselves. In a world where traditional investing was very boring, there was not really good gains on a lot of equities and bonds. People were looking at what I guess you could call alternative investments. Some watches, not all watches, but some watches were definitely the focus for that community.
Alex Friedman: So when you hear People talking about wanting to buy watches as an investment, what are your immediate gut reactions? Just as a watch collector and then maybe taking a couple steps back, what are your thoughts just as a watch blogger too?
Ariel Adams: The thing that's the most challenging for me as an enthusiast is when more money and attention goes into it. All that really ends up happening is you have to spend more money for the same thing. Doesn't really make the watch any better. But since there's more demand, you as someone who's accustomed to what you know, legacy pricing or demand is, are now shocked with how much things cost. Because more People want the same thing. What you essentially do as an enthusiast, you have to shift your attention to less common watches, less common brands, things that just aren't in demand. It's easy to pivot if you're a sophisticated collector. But a lot of collectors were, of course, very annoyed that the Rolex is that were relatively easy to get, that you could get a discount. Now we're not only unavailable at a retail, even with retailers you had good relationships with, but we're now commanding premiums. I think the other thing I was thinking is that this was a classic bubble. You knew that it was only temporary and all the wise economics wisdom out there said if you participate in a bubble, chances are that you are going to be left with a hot potato. Like if you don't hand it off before the bubble bursts, then you're going to be in a problem. I think a lot of People were in that situation where they bought Rolex watches for above retail, hoping that somebody else out there will want them for even more above retail. But that trend is decreasing. What you end up having is a lot of People, some maybe very unfortunate situations where People just spent too much so to say.
Alex Friedman: Obviously, when People think of watch brands, usually the company or the brand that comes to mind first is Rolex. What do you think it is about Rolex as a brand, as a company that has really allowed them to endure the test of time in the watch industry?
Ariel Adams: A good example I like to give is with the car industry because I think that's a little bit more understandable for most, very often the watch industry is compared to the car industry and there are a lot of parallels. I think a great parallel goes with a car like a Ferrari. Although very few people own a Ferrari, you would say that Ferrari has done an excellent job educating so many people around the world as to what the Ferrari name means, and in a lot of instances, what a Ferrari looks like. You could be driving in a Ferrari past people who cannot afford a Ferrari, and they'll be like, hey, that's a Ferrari. It's a similar situation with Rolex. The popularity of the brand, which is really one of the assets of the company, is such that people around the world know the Rolex name. When you have that type of popularity, you have increased demand, and that is really directly related to some of the higher prices, most of the other brands, because they don't have that popularity, there aren't as many people out there who can readily appreciate that you have a nice item. That's really more of a niche luxury item where the right groups, the right circles of people will know what it is. A lot of people, when they're choosing a watch, I think one of the most important things to decide is, do you want to wear a luxury watch that many other people recognize? Or are you more interested in a discrete purchase?
Alex Friedman: When it comes to the popularity of Rolex as a brand in particular, is there anything that you think they've done to position themselves in such a way that makes them so admired by so many people who are interested in watches?
Ariel Adams: Absolutely. Rolex in a lot of ways as a business entity is almost an eighth wonder of the world. I mean, it is a very fascinating thing that probably needs to be studied more really, just how the business entity was created. In regards to marketing, a long time ago, Rolex decided that a very large percentage of its revenues would be rolled back into marketing. Most companies have to make decisions each year, how much are we going to spend into marketing? Rolex has really sort of made a lot of those decisions in advance, so a lot of their decisions are, how are we spending on marketing? Rolex got started with this decades ago and most people know the Rolex, clock at airports. The Rolex name is the sponsor of really what the world's biggest sports events are, in a lot of ways between tennis and racing. Rolex has engaged in a multi pronged marketing approach for many years. To be positioned as the watch of winners, to be positioned as the watch worn by the most successful people, to be positioned as a watch that has the most historical relevancy with important personalities and things like that. They've been pushing these messages for so long that many of us grew up with them. I think that that's really the simple thing is Rolex has been actively doing it and doing it for long enough that people have developed the desire for Rolex over their entire lifetimes. Many other brands people are learning about merely as adults and therefore the relationship just takes longer to develop, if at all.
Alex Friedman: For people who might not be too familiar with watches, they might not be aware of the challenges of getting especially sought-after pieces from a retailer. I guess I'm curious, for our listeners, can you explain why you think that is? If there is anything that these watch companies can do to try to make it easier for customers to get watches?.
Ariel Adams: I'm going to answer that in a slightly roundabout way, but I think you'll appreciate the way I go about it. Luxury companies learned a long time ago that there's a very effective strategy with consumers who can otherwise afford pretty much everything that they sell. Remember, when you're a luxury brand, really what you're trading in is desirability. Most people don't really think about it that way. But the desirability of Rolex is what's going to get you to spend the money on it. Because you can get a nice item that tells the time for far cheaper. You desire the Rolex brand and that makes you want to buy it. What they've found is that when a wealthy consumer can just go into a store and buy whatever they want, that doesn't create as much desirability when that thing is hard to get. What has ended up happening in a lot of different ways is a luxury industry has found that if you manipulate availability and create some tug and pull with otherwise wealthy consumers, you trigger insecurity in them. These are individuals who are used to having shopkeepers, fawn over them and bend over backwards.
But then in the watch industry, it's like oftentimes they can't get the time of day. Now some consumers rightfully walk out and be like, I'm going to go someplace that values my money more, but too many buy into it. That insecurity makes them be like, I need to be on the list. Can I buy some other watches to get higher in the list? Can I be nice to you? Sometimes they'll pay over retail. This idea that you can trigger the insecurity in a consumer who would otherwise take their business elsewhere has been a manipulative but very effective strategy for a lot of Rolex buyers. That's the context within which you see this, it being very hard to get, especially now where a lot of them are more available. But because this is such an effective strategy, brands even play this up. Even when there is more availability, they will pretend that there's less availability because it allows them to have more power over the consumer's mind.
Alex Friedman: The watch industry is pretty interesting because on one hand you have companies like Rolex and Patek Philippe that are privately owned and then you have other conglomerates like Richemont and LVMH and Swatch Group that own companies like Cartier and IWC and Hublot. I'm curious, do you think that there's a difference between how publicly traded watch companies think about the future versus how privately held watch companies think about the future?
Ariel Adams: Absolutely and you see an enormous amount of differences in how they run their businesses and the decisions they make. I would say that the biggest, drawback of a corporate owned group is the existence of disinterested third party shareholders. The share price of the group, as well as the investment interest of those disinterested shareholders and that they want dividends, they want profits, they want things like that. Means that the company is always going to have a tug of war between spending on itself and spending on the parent entity. There are advantages, there's a sort of group buying power and the ability to have, some of the best talent. But in a lot of ways, those corporate-owned companies, not in all instances, but in many instances, can be hampered by decisions that affect the group and affect the share price. An independent company doesn't have to have those same types of concerns. It can have a longer term vision. It doesn't have to worry about pleasing anyone, but the egos of the people in charge and so what you see during more challenging periods is that the independent brands or the independently, run brands are those that tend to be the most agile, tend to be the most successful commercially. But again, it makes sense. The really big ships just take more time to turn and the smaller ones that have less people on board to make decisions can do so faster. I think that where you see the luxury brands that are corporate owned, thriving is in more stable periods where they're able to understand a ten year plan, maybe a five year plan and that's where they're going to be able to deliver the most value and then, when you're in a crazy time like today, the smaller companies, the ones that are a lot more agile, that's who are going to be the more exciting and in many instances offer the better values.
Alex Friedman: For people that don't follow the watch industry. They might not be aware of the fact that Rolex, historically actually hasn't sold watches directly to customers. With maybe one small exception, a store in Geneva. But it seems like that might be changing. Rolex recently acquired Bucherer, the largest Rolex watch dealer globally. What's especially interesting about this is Bucherer sells other watch brands too. This came out about two months ago. I know it's still being reviewed by regulators in Switzerland, but I'd love to hear your thoughts on this development and what you think it means for the watch industry.
Ariel Adams: This is a very easy story to misunderstand, and I'm glad you brought it up. There's so much context there, it's difficult to know where to start. But you're right. Essentially, Rolex purchased a major group of retailers. That retailer, I understand was Rolex's biggest wholesale client. Rolex sales via wholesale to watch stores all around the world. But since Bucherer is not only Swiss but has a bunch of stores, they I think were the largest single client. Bucherer is at risk of being purchased by a private equity company or someone else. I believe that Rolex was very worried that somebody would get overzealous and think that they can manipulate the market or do whatever is done and that would have a negative effect on mid term to long term Rolex sales for their biggest account. Rolex basically said, let's acquire Bucherer for stability, not to earn more money, they don't need more money, and not to really negatively affect the market for others.
Meaning they're not really trying to push other brands out. It is very easy to misunderstand that and look at it and be like, oh, Rolex is trying to capture margin. Rolex wants to push out competitors. The thing is, Rolex doesn't really have too much incentive to do that. Rolex has more incentive to promote stability, to make sure that they're local Swiss ownership. Remember Rolex and Bucherer's companies have been working together closely for like 100 years or something like that. From a cultural perspective, it's not very difficult to integrate, and Rolex more or less knows how their business works. I've spoken to people at Bucherer, including Bucherer, the change of stores, as well as Carl F. Bucherer, which is a watch brand that now Rolex owns about it, there's not too much they can say because there's not too much to say. Their understanding is that nothing for them will change now or in the long run and Rolex has every reason to not rock the boat. Again, my understanding from my intuition and the research I've done is that Rolex did this to prevent instability and someone else owning Bucherer that essentially not have a long term vision of the market. They didn't buy it in order to increase their profits in any appreciable way or to squeeze out others.
Deidre Woollard: As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. I'm Deidre Woollard. Thanks for listening. We'll see you tomorrow.
