(#34) Apple is a product company; Luxury brands go into sports; Where companies use Generative AI; Chinese mothers are busy...trying to marry their adult children
China is aging fast. Average worker has 40 years.
August is here and at this point, it seems that the pace is a little bit slower. However, still, things are happenings: quarterly earnings, interviews, business decisions, etc. Like I used to say: “Business as usual”. So, onto the update:
Strategy
Reminder: Apple is a product company
Here is The Wall Street Journal:
“Apple said revenue declined for the third consecutive quarter, the company’s most prolonged sales slump since 2016 as the iPhone-maker continued to deal with declining demand for consumer devices.[...] Apple said revenue in its services unit reached a new all-time high of $21 billion, driven by more than one billion paid subscriptions to offerings such as streaming music, TV products, or spending software in the App Store.” LINK
Here are the real takeaways from the quarterly call:
1/ Apple is making most of the money from the iPhone and will continue to do so for at least 5 more years. (maybe 10!)
2/ Surpassing 1 billion in subscriptions is great, but all this is possible due to Apple’s great product ecosystem
3/ The iPhone owners want a new iPhone and more Android users are switching to iPhone; it’s just a matter of timing (e.g. hypercycle)
4/ The smartphone market is slowing everywhere. Idle capacity and employee time will translate into lower prices which will translate to better profit margins for companies like Apple.
That being said, this is the leading framework for Apple:
The era of ultracheap stuff is under threat
Inflation contributed the most to the current higher costs and not just in Asia. China’s GDP per capita is now in the range of developing countries. LINK
At drew my attention is the following:
“In 2001, Nike reported that more than 80% of its factory workers were in Asia, and that the typical one was 22, single and raised on a farm. Today, Nike’s average worker in China is 40, and in Vietnam, 31, in part because Asian countries are aging rapidly”
and…
“Everybody wants to be an Instagrammer or a photographer or a stylist or work at a coffee shop,”
McKinsey 2023 summer reading guide. LINK
Prada and Burberry go into sports
Why?
1/ Each company made around EUR 4.2 billion in 2022. The overall sports apparel market is close to EUR 180 billion.
2/ Two billion people watch sports
3/ Traditional sports apparel brands go premium (e.g. Nike).
As the old quote says: “Follow the money”. LINK
Armani is already “in the game” sponsoring the football team SSC Napoli.
Meta and RayBan
There is an old saying that software companies don’t know to do products.
From The Wall Street Journal:
“Less than 10% of the Ray-Ban Stories purchased since the product’s launch in September 2021 are used actively by purchasers, according to a company document from February reviewed by The Wall Street Journal. Meta META -1.24%decrease; red down pointing triangle sold a total of 300,000 of the wearable devices through February, but the company only had about 27,000 monthly active users.” [...] it has experienced a 13% return rate, according to the document.”
Q.E.D.
The inside story of how Meta built Threads
The most important takeaway I guess is how important is to build a product that works, especially when tens of millions join in a couple of days. Who would have taught that after the web 3.0 revolution (ie. read - write - own) somebody will build (another) web 2.0 platform?
I am bearish on Threads, overall. LINK
Knowledge Partner: Bucharest Business School
The Alumni Association of the Bucharest Business School organizes in partnership with MIP Politecnico di Milano an international learning experience for its community, in Milan, between 19-21.10.2023.
Luxury Brand Management in Milan:
3 days, 19-21.10.2023.
Lectures, guest speakers, and company visits.
Day 1: Fashion, Day 2: Wine & Food, Day 3: Watches
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Artificial Intelligence
GenAI 50: The most promising generative artificial intelligence startups of 2023. LINK
How to invest in Generative AI start-ups (framework). LINK
Generative AI for robot arms, from Google. LINK
The state of AI in 2023: Generative AI’s breakout year, by McKinsey. LINK
Probably, the most rapid technology adopted by business, although it’s early days.
How AI Will Create a New Category of Games, from a16z. LINK
Data
It’s NFT Time presented this week a report from Deloitte on “2023 sports fan insights: The beginning of the immersive sports era”. LINK
Insightful information, but this drew my attention:
European IPOs fall to the lowest level since 2009
Just 34 companies were publicly listed in Europe in the first semester of 2023 raining EUR 2.4 billion (-42% YoY). LINK
Overregulation (including in the banking sector) and other red tape initiatives transmit a message to the market: you cannot grow your start-up here. Go to the USA! (or Israel)
Investments in China fell, hinting at the strategy unfolding: derisking
Fires in Europe are at the lowest in the last 10 years…for now. LINK
Outside Interest
Rune Christensen, the founder of MakerDAO, wrote an important thread about what’s coming next for him. The plan is called Endgame and aims to increase voters’ participation and overall governance. LINK
Desperate Chinese parents are joining dating apps to marry off their adult children. LINK
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